Disclaimer: This document is a translation of the Japanese original. The Japanese original has been disclosed in Japan inaccordance with Japanese accounting standards and the Financial Instruments and Exchange Act. This document does notcontain or constitute any guarantee and the Company will not compensate any losses and/or damage stemming fromactions taken based on this document. In the case that there is any discrepancy between the Japanese original and thisdocument, the Japanese original is assumed to be correct.

Annual Securities Report

Fiscal year

From March 1, 2022

(The 65th)to February 28, 2023

MORESCO Corporation―1―

Table of Contents

Page
The 65th Term Annual Securities Report[Cover Page] .............................................................................................................................................................................................. 4
Part I. Company Information ..................................................................................................................................................................... 4
I. Company Overview ............................................................................................................................................................................ 4
1. Key Financial Data and Trends .................................................................................................................................................... 4
2. Corporate History ........................................................................................................................................................................ 6
3. Business Line ............................................................................................................................................................................... 8
4. Information on Subsidiaries and Affiliates ................................................................................................................................... 9
5. Employees.................................................................................................................................................................................. 11
II Business Overview ........................................................................................................................................................................... 12
1. Management Policy, Business Environment, Issues to Be Addressed, etc. ................................................................................ 12
2. Business and Other Risks........................................................................................................................................................... 13
3. Analysis of Financial Position, Operating Results, and Cash Flows by Management ............................................................... 15
4. Material Business Agreements, etc. ........................................................................................................................................... 18
5. Research and Development Activities ...................................................................................................................................... 19
III Equipment and Facilities................................................................................................................................................................. 21
1. Capital Expenditures .................................................................................................................................................................. 21
2. Major Equipment and Facilities ................................................................................................................................................. 21
3. Plans for Additions and Disposals of Facilities .......................................................................................................................... 22
IV. Information on the Reporting Company......................................................................................................................................... 23
1. Information on the Company’s Shares, etc. ............................................................................................................................... 23
2. Information on Acquisition of Treasury Shares, etc. .................................................................................................................. 26
3. Dividend Policy ......................................................................................................................................................................... 27
4. Corporate Governance, etc. ........................................................................................................................................................ 28
V. Financial Information ...................................................................................................................................................................... 43
1. Consolidated Financial Statements, etc. ..................................................................................................................................... 44
2. Non-Consolidated Financial Statements, etc.............................................................................................................................. 85
VI. Outline of Share-related Administration of Reporting Company................................................................................................... 98
VII Reference Information of Reporting Company ............................................................................................................................. 99
1. Information on parent company, etc. of the reporting company ................................................................................................. 99
2. Other reference information ....................................................................................................................................................... 99
Part II Information on the Reporting Company’s Guarantor, etc. ...................................................................................................... 100
Audit Report―2―

[Cover Page][Document Filed]Annual Securities Report (“Yukashoken Hokokusho”)[Applicable Law]

Article 24, Paragraph 1 of the Financial Instruments and Exchange Act ofJapan[Submit to]

Director, Kinki Local Finance Bureau[Reporting Date]

May 30, 2023

[Fiscal Year]The 65th Term (from March 1, 2022 to February 28, 2023)[Company Name]

MORESCO Corporation[Company Name in English]

MORESCO Corporation[Title and Name of Representative]

Motohisa Morozumi, CEO, Representative Director, President[Address of Registered Office]5-5-3 Minatojimaminamimachi, Chuo-ku, Kobe City

[Phone Number]+81-78-303-9010[Contact Person]

Hirofumi Fujimoto, Director, Senior Executive Officer[Contact Address]

5-5-3 Minatojimaminamimachi, Chuo-ku, Kobe City

[Phone Number]+81-78-303-9220[Contact Person]

Hirofumi Fujimoto, Director, Senior Executive Officer[Place Where Available for Public Inspection]

MORESCO Corporation Tokyo Branch(1-8-1 Nishi-shimbashi, Minato-ku, Tokyo)
MORESCO Corporation Osaka Branch(3-2-15 Bingo-machi, Chuo-ku, Osaka City)
Tokyo Stock Exchange, Inc.
(2-1 Nihonbashi Kabuto-cho, Chuo-ku, Tokyo)―3―

[Cover Page]

Part I. Company Information
I. Company Overview
1.

Key Financial Data and Trends(1) Consolidated Management Indicators
Fiscal year

61st

62nd

63rd

64th

65th

Year end

February 2019

February 2020

February 2021

February 2022

February 2023

28,806

27,06424,47927,30030,333

2,202

1,568

1,030

2,011

1,046

1,438

776

518

1,808

615

1,172

953

683

2,848

1,353

17,775

18,20918,163

20,551

21,24028,25628,12927,70729,00832,017

Net sales
Ordinary profit
Profit attributable toowners of parent
Comprehensive income
Net assets
Total assets(Millionsof yen)(Millionsof yen)(Millionsof yen)(Millionsof yen)(Millionsof yen)(Millionsof yen)Net assets per share(Yen)

1,637.29

1,659.74

1,695.81

1,914.94

2,008.49

Earnings per share(Yen)

148.85

80.91

54.09

192.76

66.19

(Yen)

―

―

―

－

－

Capital adequacy ratio

(%)

55.6

56.6

57.4

61.9

57.9

Rate of return on equity

(%)

9.3

4.9

3.3

10.7

3.4

Price-earnings ratio(Times)

10.4

13.7

20.9

5.8

17.4

Cash flows from operating
activities
Cash flows from investing
activities
Cash flows from financing
activities
Cash and cash equivalents
at the end of period(Millionsof yen)(Millionsof yen)(Millionsof yen)

2,599

1,771

2,088

2,333

515

(2,060)(1,589)

(660)

603

(1,172)(949)

78(1,019)(2,937)

1,227(Millionsof yen)

2,930

3,213

3,675

3,654

4,186

Number of employees(Persons)

765

777

791

787

784

Diluted earnings per share

Notes:

1.
2.

Diluted earnings per share are not stated as there are no dilutive shares.
Starting from the beginning of the consolidated fiscal year under review, the Company has adopted the AccountingStandard for Revenue Recognition (ASBJ Statement No. 29, March 31, 2020), etc. Therefore, the major
management indicators of the consolidated fiscal year under review are the figures after the said accounting standard
has been applied.

―4―

(2) Non-consolidated Management Indicators
Fiscal year

61st

62nd

63rd

64th

65th

Year end

February 2019

February 2020

February 2021

February 2022

February 2023

17,813

16,874

14,961

16,28817,162

1,268

961

642

1,284

1,004

1,048

719

(63)

1,650

856

2,118

2,118

2,118

2,118

2,118

9,697

9,697

9,697

9,697

9,697

11,329

11,578

10,904

12,13812,474

19,551

19,666

18,614

17,95520,2001,181.15

1,206.19

1,163.00

1,294.05

1,351.83

50.00

50.00

40.00

40.00

40.00

(25.00)(25.00)(15.00)(20.00)(20.00)Net sales
Ordinary profit
Profit (loss)
Capital stock
Total number of issued
sharesNet assets
Total assets(Millionsof yen)(Millionsof yen)(Millionsof yen)(Millionsof yen)(Thousands ofshares)(Millionsof yen)(Millionsof yen)Net assets per share(Yen)

Dividend per share(Interim dividend pershare)(Yen)

Earnings (loss) per share(Yen)

108.4674.95(6.63)

175.92

92.15

Diluted earnings per share

(Yen)

―

―

―

－

－

Capital adequacy ratio

(%)

57.9

58.9

58.6

67.6

61.8

Rate of return on equity

(%)

9.4

6.3

―

14.3

7.0

(Times)

14.3

14.7

―

6.3

12.5

(%)

46.1

66.7

―

22.7

43.4

Number of employees(Persons)

375

377

391

384

381

Total shareholder return(Comparison: Dividendincluded TOPIX)

(%)

85.7

64.6

68.1

69.3

73.4

(%)

(92.9)(89.5)(113.2)(117.0)(127.0)Highest share price

(Yen)

2,026

1,557

1,271

1,282

1,279

Lowest share price

(Yen)

1,331

1,102

730

1,050

1,021

Price-earnings ratio
Payout ratio

Notes:

1.
2.
3.
4.
5.
6.

Diluted earnings per share are not stated as there are no dilutive shares.
Dividend per share for the 61st term includes a commemorative dividend (the 60th anniversary of the company) of 5yen.
Rate of return on equity of the 63rd term is not stated because a net loss was recorded for the year.
Price-earnings ratio and payout ratio for the 63rd term are not stated because net loss per share was recorded for theyear.
Highest and lowest share prices are those on the Tokyo Stock Exchange (Prime Market) from April 4, 2022, andthose on the Tokyo Stock Exchange (First Section) before that.
Starting from the beginning of the fiscal year under review, the Company has adopted the Accounting Standard for
Revenue Recognition (ASBJ Statement No. 29, March 31, 2020), etc. Therefore, the major management indicatorsof the fiscal year under review are the figures after the said accounting standard has been applied.

―5―

2.

Corporate History
Date

November 1995
October 1958
December 1959
March 1962
December 1965

Event
Research laboratory (origin of the Company) established in the Shinkawa Plant of Matsumura Oil
Corporation.
The research laboratory separated from Matsumura Oil Corporation to establish the Company.
Head Office and Nishinomiya Plant constructed in Nishinomiya City, Hyogo, to develop and manufacture
specialty lubricants, such as high vacuum pump oil, and synthetic lubricants
Developed water glycol fire-resistant hydraulic fluid HYDOL H-200 and 300

March 1971

Chiba Plant built in Ichihara City, Chiba, to start mass production of liquid paraffin and petroleum
sulfonatesTokyo Sales Office opened in Chuo-ku, Tokyo

March 1973

MATSUKEN CO., LTD. (currently consolidated subsidiary) established

November 1980

Nagoya Sales Office opened in Higashi-ku, Nagoya City

September 1986

Akoh Plant built in Akoh City, Hyogo, to start mass production of hot melt adhesives

November 1990

Akoh Plant second construction: lubricating oil production line completed

March 1992

MORESCO TECHNO CO., LTD. (now consolidated subsidiary) establishedMarch 1994

MORESCO SERVICE Co., Ltd. established

June 1995

MORESCO (Thailand) Co., Ltd. (now consolidated subsidiary) established in Chonburi, Thailand

September 1998

Acquired ISO 9001 international quality standard certification

January 2001

Head Office and Research Center relocated to Chuo-ku, Kobe

March 2001

November 2001

Akoh Plant third construction: lubricant distillation equipment and other facilities transferred from
Nishinomiya Plant (Nishinomiya plant site was sold due to expropriation)
Wuxi More Tex Technology Co., Ltd. (now equity method affiliate) established in Wuxi City, China, as a
joint venture with a Taiwanese firm
MORESCO Hommachi Bldg. built in Chuo-ku, Osaka, to which Osaka Branch relocatedMarch 2001

February 2003

MORESCO Holding (Thailand) Co., Ltd. (now consolidated subsidiary) established in Chonburi, Thailand

November 2003

Stock registered with the Japan Securities Dealers Association

December 2004
September 2005

Cancelled over-the-counter registration with the Japan Securities Dealers Association, and listed on
JASDAQ market
Nagoya Sales Office relocated to Naka-ku, Nagoya City

February 2006

Acquired ISO 14001 international environmental standard certification

May 2006

MORESCO USA Inc. (now consolidated subsidiary) established in Michigan, USA

July 2008

Listed on the Tokyo Stock Exchange Second Section

May 2009

Moresco Cn. Trustexporter. Com. established in Wuxi City, China

August 2009

Acquired business related to manufacturing and sales of die casting lubricants from HANANO Corporation

September 2009

Changed trade name from Matsumura Oil Research Corp. to MORESCO Corporation

September 2009

March 2010

Succeeded the lubricant business of MATSUKEN CO., LTD. (now consolidated subsidiary) through anabsorption-type company split
Made MORESCO HANANO DIE-CASTING COATING (SHANGHAI）CO., LTD. (now consolidated
subsidiary) in Shanghai, China, a consolidated subsidiary
Made Ethylene Chemical Co., Ltd. (now consolidated subsidiary) an equity method affiliate

February 2011

Listed on the Tokyo Stock Exchange First Section

February 2010

June 2011
September 2011
January 2012
August 2013
March 2014

PT.MORESCO INDONESIA (now consolidated subsidiary) established in Karawang, Indonesia
Made Ethylene Chemical Co., Ltd.(now consolidated subsidiary) a consolidated subsidiary from an equity
method affiliate
PT.MORESCO MACRO ADHESIVE (now consolidated subsidiary) established in Jakarta, Indonesia
Acquired business related to manufacturing and sales of die casting fluids and lubricants for hot forging
from NICCA Chemical Co., Ltd.
TIANJIN MORESCO TECHNOLOGY CO., LTD. (now consolidated subsidiary) established in Tianjin,
China

―6―

Date

Event

August 2015

Tokyo Branch relocated to Minato-ku, Tokyo

October 2015

Second R&D building constructed at the Head Office Research Center site

November 2015

September 2017

Changed trade name of Moresco. Cn. Trustexporter. Com. to WUXI MORESCO TRADING CO., LTD.
(now consolidated subsidiary)
MORESCO HM&LUB INDIA PRIVATE LIMITED (now consolidated subsidiary) established in
Ahmedabad, Gujarat, India
Absorbed MORESCO SERVICE Co., Ltd., a consolidated subsidiary

November 2017

Nagoya Sales Office relocated to Naka-ku, Nagoya City

February 2017

May 2020

Became a company with an audit and supervisory committee

April 2021

Sold MORESCO Hommachi Bldg.

May 2021

Tokyo Branch relocated to Minato-ku, Tokyo

March 2022

MORESCO (ZHEJIANG) FUNCTION MATERIAL CO., LTD. (now consolidated subsidiary) establishedin Haining, China
Listed on the Tokyo Stock Exchange Prime Market

April 2022
November 2022

MORESCO TRADING (ZHEJIANG) CO., LTD. (now consolidated subsidiary) established in Haining,
China

―7―

3.

Business Line
The MORESCO Group consists of the Company (MORESCO Corporation), 14 consolidated subsidiaries, and two equity method
affiliates. The main business is manufacture and sales of chemical products (specialty lubricants, synthetic lubricants, liquidparaffin & sulfonates, hot melt adhesives, energy device materials), and the major products are as follows:[Specialty Lubricants]
High vacuum pump oil, fire-resistant hydraulic fluid, die casting fluids, lubricant for hot forging, cutting fluids, brake fluids
and antifreeze for automobiles, heat transfer medium[Synthetic Lubricants]
High temperature lubricating oil, hard disk surface lubricant, radiation resistant lubricating oil[Liquid Paraffin & Sulfonates]
Liquid paraffin, sulfonate[Hot melt adhesives]
Hot melt adhesives[Energy device materials]
Organic EL sealant, gas & water vapor transmittance measurement device
The Group consists of four reportable segments organized by region, based on manufacturing and sales structures: Japan, China,
Southeast/South Asia, and North America.
In Japan, the Company is engaged in manufacture and sales of major products. Ethylene Chemical Co., Ltd. is engaged in
manufacture and sales of brake fluids and antifreeze for automobiles.
In China, Wuxi More Tex Technology Co., Ltd. and MORESCO HANANO DIE-CASTING COATING(SHANGHAI）CO., LTD. manufacture specialty lubricants, and WUXI MORESCO TRADING CO., LTD. and MORESCO
TRADING (ZHEJIANG) CO., LTD. sell them. TIANJIN MORESCO TECHNOLOGY CO., LTD. manufactures and sells hot
melt adhesives. MORESCO (ZHEJIANG) FUNCTION MATERIAL CO., LTD. is building a plant for manufacture and sales of
specialty lubricants.
In Southeast/South Asia, MORESCO (Thailand) Co., Ltd. manufactures and sells specialty lubricants and imports and sells
hot melt adhesives. In Indonesia, PT.MORESCO INDONESIA manufactures and sells specialty lubricants, and PT.MORESCO
MACRO ADHESIVE manufactures and sells hot melt adhesives. In India, MORESCO HM&LUB INDIA PRIVATE LIMITED
manufactures and sells specialty lubricants and hot melt adhesives.
In North America, MORESCO USA Inc. manufactures and sells specialty lubricants and synthetic lubricants in the UnitedStates.
[Business organization diagram]
The business organization diagram below shows the Group’s businesses described above.
Japan
Manufacturing/sales company

Products

Sales company● Ethylene Chemical Co., Ltd.
•

Manufacturingcontract

Service company● MATSUKEN CO., LTD.
•

Automotive chemical products

Products● MORESCO TECHNO CO., LTD.
•

Wastewater treaatment equipment

Related party (major corporate shareholder)
Matsumura Oil Corporation

Analysis and testing service

Manufacturingcontract

Products

Raw materials

Products

MORESCO Corporation（Manufacture and sale of chemical products）

Raw materials

Products

China
Manufacturing/sales company● WUXI MORESCO TRADING CO., LTD.
•

Lubricants (sales company)● MORESCO HANANO DIE-CASTING COATING (SHANGHAI）CO., LTD.

•

Lubricants (manufacturing company)● MORESCO TRADING (ZHEJIANG) CO., LTD.
•

Lubricants (sales company)

Products

Raw materials

Southeast/South Asia
Manufacturing/sales company● MORESCO (Thailand) Co., Ltd.
•

Lubricants, adhesives•

North America
Manufacturing/sales company● MORESCO USA Inc.
•

Lubricants

Lubricants● PT. MORESCO MACRO ADHESIVE•

Adhesives● MORESCO HM&LUB INDIA PRIVATE LIMITED● TIANJIN MORESCO TECHNOLOGY CO., LTD.

* Holding company in Thailand● MORESCO Holding (Thailand) Co., Ltd.

•

Products● PT. MORESCO INDONESIA● MORESCO (ZHEJIANG) FUNCTION MATERIAL CO., LTD.
Lubricants (manufacturing and sales company)•
Adhesives (manufacturing and sales company)

Raw materials•

Lubricants, adhesives● Wuxi More Tex Technology Co., Ltd.
•

Lubricants (manufacturing and sales company)

Legend●Consolidated subsidiary■Equity method affiliate● Zhangjiagang TEEC Automotive Chemicals Co., Ltd.
Automotive chemicals (manufacturing and sales company)
•

―8―

4.

Information on Subsidiaries and Affiliates
Name

Address

Ownership ofvoting rights(%)

Capital stock

Main business

100.0

100.0

Relationship(Consolidated
subsidiaries)
MATSUKEN CO., LTD.

Chuo-ku, Osaka

20 million yen

Sales and export ofwastewater treatment
equipment and agents

MORESCO TECHNO
CO., LTD

Chuo-ku, Kobe

10 million yen

Analysis and testing

Ethylene Chemical Co.,Ltd.

Ichihara, Chiba

MORESCO(Thailand)
Co.,Ltd.

Thailand
Chonburi17.5 million
Thai baht

MORESCO Holding(Thailand)Co.,Ltd.

Thailand
Chonburi

2 million
Thai baht

MORESCO USA Inc.

United States
Fountain Inn,
South Carolina

WUXI MORESCO
TRADING CO., LTD.
(Note 5)China
Wuxi, Jiangsu
Province

MORESCO HANANO
DIE-CASTINGCOATING(SHANGHAI）CO.,
LTD.

China
Shanghai

90 million yen

10USD

100 million yen

1 million
USD

Manufacture, sales,and export of heattransfer media andautomotive chemical
products
Manufacture, sales,
and import/export oflubricants, and importand sales of hot melt
adhesives
Investment

Manufacture, sales,
and import/export oflubricants
Sales and
import/export oflubricants, andimport/export ofmaterials for the
products

Manufacture of die
casting fluids
Sales and
import/export oflubricants andsealants, andimport/export ofmaterials for the
products

60.9

78.0

Engaging in licensed production of theCompany’s die casting fluids
Concurrent officers
Employees of the Company: 3

100.0

Engaging in sales of the Company’s
lubricants under license by
MORESCO HANANO DIECASTING COATING (SHANGHAI）
CO., LTD. and Wuxi More Tex
Technology Co., Ltd.
Concurrent officers
Employees of the Company: 3

100.0

Planned to be engaged in licensed
production and sales of lubricants of
the Company
Concurrent officers
Employees of the Company: 3

China
Haining－

MORESCO(ZHEJIANG)
FUNCTION
MATERIAL CO., LTD.
(Notes 2, 4)

China
Haining

6 million
USD

Development,
manufacture, sales,
and import/export oflubricants and sealants

China
Tianjin10 million
USD

Manufacture, sales,
and import/export ofhot melt adhesives

100.0

PT.MORESCO
INDONESIA(Note 2)Indonesia
Karawang

3.5 million
USD

Manufacture, sales,
and import/export oflubricants

51.0

PT.MORESCO MACROADHESIVE(Note 2)Indonesia
Jakarta

3 million
USD

Manufacture, sales,
and import/export ofhot melt adhesives

51.0(Note 2)―9―

Producing the Company’s heat transfer
media and lubricants for hot forging
Concurrent officers
None

Engaging in licensed production and99.2 sales of the Company’s lubricants(51.2) Concurrent officers(Note 1) Officers of the Company: 1
Employees of the Company: 1
Holding company in Thailand
90.6
Concurrent officers(9.2)
Officers of the Company: 1(Note 1)
Employees of the Company: 1
Engaging in licensed production andsales of the Company’s lubricants
100.0 Concurrent officers
Officers of the Company: 1
Employees of the Company: 1
Engaging in sales of the Company’s
lubricants under license by
MORESCO HANANO DIECASTING COATING (SHANGHAI）
100.0
CO., LTD. and Wuxi More Tex
Technology Co., Ltd.
Concurrent officers
Employees of the Company: 3

MORESCO TRADING(ZHEJIANG) CO., LTD.
(Note 3)TIANJIN MORESCOTECHNOLOGY CO.,LTD.

Selling the wastewater treatment
agents manufactured by the Company.
Concurrent officers
Officers of the Company: 2
Renting the office.
Conducting lubricant control (testing
and analysis) of fluids manufactured
and sold by the Company
Concurrent officers
Officers of the Company: 1
Employees of the Company: 2
Renting a part of the office andanalytical equipment

Engaging in licensed production andsales of the Company’s hot melt
adhesives
Concurrent officers
Officers of the Company: 1
Employees of the Company: 2
Engaging in licensed production andsales of the Company’s lubricants
Concurrent officers
Officers of the Company: 2
Engaging in licensed production andsales of the Company’s hot melt
adhesives
Concurrent officers
Officers of the Company: 1
Employees of the Company: 2

Name

MORESCO HM&LUB
INDIA PRIVATELIMITED(Note 2)

Address

Capital stock

India
Ahmedabad,
Gujarat

600 million
Indian rupee

Main business

Manufacture, sales,
and import/export ofhot melt adhesives
and lubricants

Ownership ofvoting rights(%)

Relationship

Engaging in licensed production andsales of the Company’s lubricants and100.0
hot melt adhesives(10.0)
Concurrent officers(Note 1)
Officers of the Company: 1
Employees of the Company: 1(Equity method
affiliates)
Wuxi More Tex
Technology Co., Ltd.

China
Wuxi, Jiangsu
Province

3 million
USD

Manufacture of
lubricants

Zhangjiagang TEEC
Automotive Chemicals
Co., Ltd.

China
Zhangjiagang,
Jiangsu Province

5 million
USD

Manufacture and salesof automotive
chemical products(Notes)

1.
2.
3.
4.

5.

50.0

Engaging in licensed production andsales of the Company’s lubricants andhot melt adhesives
Concurrent officers
Officers of the Company: 2
Employees of the Company: 1

25.0(25.0)(Note 1)―Figures in brackets represent the percentage of indirect ownership included in Ownership of voting rights.
Indicates companies classified as specified subsidiaries.
MORESCO TRADING (ZHEJIANG) CO., LTD. was established on November 30, 2022. Although it had no paidup capital as of February 28, 2023, its registered capital is 10 million Chinese yuan.
MORESCO (ZHEJIANG) FUNCTION MATERIAL CO., LTD. was established on March 23, 2022. The figure
presented for Capital of the company is the amount of paid-up capital as of February 28, 2023, and the amount of its
registered capital is USD 12 million.
Net sales of WUXI MORESCO TRADING CO., LTD. (excluding internal sales between consolidated companies)
account for over 10% of consolidated net sales. Major profit and loss figures are as follows:(1) Net sales: 3,186 million yen(2) Ordinary profit: 358 million yen(3) Profit: 260 million yen(4) Net assets: 1,341 million yen(5) Total assets: 2,127 million yen

―10―

5.

Employees(1) Consolidated companies
As of February 28, 2023
Segment

Number of employees (persons)

Japan

466

China

107

Southeast/South Asia

201

North America

10

Total

784

(Notes)1.

The number of employees represents the number of full-time employees.

(2) Information on the reporting company
As of February 28, 2023
Number of employees (persons)381(Notes)1.
2.
3.

Average length of service(years)Average age (years old)
43.5

14.0

Average annual salary (yen)6,973,544

The number of employees represents the number of full-time employees.
Average annual salary includes bonuses and non-standard wages.
All of the above employees belong to the Japan segment.

(3) Labor unions
The MORESCO Group’s labor unions in Japan are MORESCO Labor Union and MATSUKEN Labor Union. Employees of
MORESCO Corporation (including those seconded to subsidiaries or affiliates) belong to MORESCO Labor Union, andemployees of MATSUKEN CO., LTD. belong to MATSUKEN Labor Union. MORESCO Labor Union has branches at all
business locations, and the union’s headquarters is located at the Head Office of the Company. As of February 28, 2023,
MORESCO Labor Union had 271 members and MATSUKEN Labor Union had 16 members. None of the MORESCO
Group’s labor unions are members of any superior body. Some of the overseas consolidated companies have labor unions.
The labor-management relationship is stable and there are no special matters to be noted.

―11―

II Business Overview
1.

Management Policy, Business Environment, Issues to Be Addressed, etc.
Matters discussed in relation to the future reflect the judgment of the MORESCO Group as of the end of the consolidated fiscal
year under review.
(1) Management policy
Under the management philosophy of “R&D for users,” the MORESCO Group has contributed to our society by satisfying
customer needs in the field of interface science (friction, abrasion, etc. that occurs at contact points between things). The
current Medium-Term Management Plan (FY2021 to FY2023) upholds the five Medium-Term Corporate Policies below:
1. Make the best use of the Group’s resources and contribute to the realization of a sustainable society.
2. Leverage our strength in both sales and development to increase the added value of our business and to accelerate
expansion to new business areas.
3. Strengthen our manufacturing competitiveness through continuous technological innovation, reducing manufacturingcosts and improving quality.
4. Improve operational efficiency through drastic business process re-engineering in the back office and promote
MORESCO’s working style reforms.
5. Have a high awareness of compliance risks and increase the trust of stakeholders.
(2) Business environment, management strategy, and priority business and financial issues to be addressed
In Japan, as the spread of COVID-19 is coming to an end, recovery can be expected in social and economic activities. In theworld, on the other hand, the Russian invasion of Ukraine, which broke out in February last year, has shown no signs ofsettlement after more than a year, and the future outlook remains uncertain. The instability in the financial conditions of the
U.S. and Europe, as well as the significant rising trend of prices in Japan, make the economic situation unclear, requiring
careful attention.
Prices of raw materials, which had continued to rise since the second half of the year before last, are becoming stable atthe moment. We will continue to reflect material price rises in selling prices with the aim of securing profits.
Aiming for improving the added value of its business and realizing a sustainable society, under the MORESCO Group
Sustainability Policy established in 2022, as well as the Management Vision below, the Company expressed its endorsementof the TCFD recommendations in November 2022 and has actively disclosed information on activities toward realization ofa carbon-neutral society.
MORESCO Group delivers sustainable one-of-a-kind products
Contributing to a Bright Future as a Specialist in Interface Science
In the environment-related field, as part of the efforts to promote a circular economy, we promote initiatives for new businesses
tailored to a sustainable society, such as increasing the recovery/recycling rate of fire-resistant hydraulic fluids and extending
product life by introducing monitoring systems. We are advancing the development of hot melt adhesives containing plantderived resin, which have been certified as biomass products, and low VOC Hot Melt Adhesive, which contributes to reducing
environmental impact, thereby contributing to realization of a sustainable society.
In the energy device field, we are promoting the development of gas & water vapor transmittance measurement devices forthe food packaging and hydrogen energy fields. By the end of fiscal 2023, we are planning to launch a transmittance measurement
device specialized in hydrogen, as a contribution to realization of a hydrogen-based society. Organic Photovoltaics (OPV) are
flexible and a light film-type solar battery. Because OPV are semi-transparent and excellent in design, we are promoting theirinstallation at commercial facilities, research institutes, public organizations and government offices. Energy stored in OPV isclean renewable energy with CO2 emissions substantially reduced. We also engage in material development with universities andare working to increase sales of OPV mainly for companies as an environment-friendly device.
In the life science field, taking advantage of organic synthetic technology, our strength, we are advancing joint research anddevelopment of new chemicals that control autophagy. We also have the technique to make poorly water-soluble active
ingredients water-soluble using our patented nano-emulsification technology so as to promote absorption of the ingredients fromskins and the intestine. We are continuously working to have the technology employed by major cosmetic companies, etc.
Overseas, in addition to the Executive Officer in charge of China, we have appointed Executive Officers in charge of North
America and Southeast/South Asia, with the aim of enhancing capabilities to capture the needs and develop new products in eachregion.
In research and development, we have established a structure for product development to promptly respond to customer
needs in each market. For the future, we will promote “ambidexterity” research and development, capable of responding to social
issues by synchronizing existing technologies and new technologies, through collaborations across Divisions and partnerships
with overseas subsidiaries and universities.
The Company has been recognized as a Certified Health and Productivity Management Organization (in the large enterprise
category) for three consecutive years from 2021 to 2023. Considering the employees’ health as a part of the company’s assets, wewill continue to provide the maximum possible support for promotion of health, placing the highest priority on a good work-lifebalance and the mental health of employees.

―12―(3) Objective indicators for determining achievement status of management goals
In fiscal 2023, the final year of the 9th Medium-Term Management Plan (FY2021 to FY2023), the targets have been set as
follows.
FY2022
FY2023(Result)(Plan)Net sales (millions of yen)

30,33334,500Operating profit (millions of yen)

523

1,400

Ordinary profit (millions of yen)

1,046

1,600

615

700

3.4％

4.6％

Profit attributable to owners of parent (millions of yen)
Ordinary profit margin (%)

2.

Business and Other Risks
Of the matters concerning the business overview and accounting condition, etc. stated in the Annual Securities Report, the mattersthat the management recognizes as major risks that may have a significant impact on the financial position, operating results, andcash flows of consolidated companies are as follows:
Matters discussed in relation to the future reflect the judgment of the MORESCO Group as of the end of the consolidated
fiscal year under review.
(1) Business expansion in overseas market
The MORESCO Group has established overseas subsidiaries in China, Thailand, Indonesia, the United States, and India as
production and sales bases to promote overseas businesses. The Group’s overseas sales, mainly from the Asian region, suchas China and Southeast Asia, are 10,484 million yen in fiscal year ended February 2022 and 11,492 million yen in fiscal year
ended February 2023, with a ratio to the consolidated net sales of 38.4% and 37.9%, respectively. Fluctuations in theeconomic condition and the value of currencies, occurrence of disasters and infectious diseases, changes in laws andregulations, and other variable factors in these overseas markets may have an impact on the business performance andfinancial position of the Group.
(2) Climate change
The MORESCO Group sees climate change as an important issue in management and recognizes that the risks andopportunities associated with climate change have a significant impact on its business strategies.
Regarding climate-related risks, we recognize the transition risks, such as the rise in costs and changes in market, andthe physical risks, such as supply chain-related risk, as the risks with a high degree of materiality and probability.
Meanwhile, the Group also sees climate change not only as a risk but also as an opportunity. We will operate ourbusinesses while balancing the realization of a sustainable society and the improvement of our corporate value in themedium to long term, and we will further contribute to solving social issues and environmental issues, thereby proactively
tackling the sustainability issues.
(3) Risks related to manufacturing of productsi) Risks associated with natural disasters, pandemics, accidents, etc.
The MORESCO Group has production sites both inside and outside Japan and is therefore greatly responsible for
ensuring stable supply. If a large-scale natural disaster, a pandemic, or an accident occurs and makes it difficult for thesesites to supply products, it may affect the Group’s business performance and financial condition.
ii) Concentration on specific production sites[Synthetic Lubricants]
The Company owns the synthesis equipment for production of high-temperature lubricating oils at the Akoh Plant andthe equipment for production of hard disk surface lubricants at the Head Office and Research Center. If a serious trouble
occurs at the plant or the Head Office and then the operation of the equipment is suspended for a long period of time, it
may temporarily stop the supply of products. The amount of stock is for about 1.0 months.
(Liquid Paraffin & Sulfonates)
The Company produces liquid paraffin and its joint product sulfonate by the sulfuric acid refining method. The
advantage of the sulfuric acid refining method is that sulfonate can be produced as a joint product, while thedisadvantage is that waste sulfuric acid is generated in the production process. The Company has established an
integrated production line (closed system) covering all processes, including disposal of waste sulfuric acid, in which theplant is directly connected by a pipeline to an adjacent waste sulfuric acid recycling company. However, since disposalof waste sulfuric acid is performed with equipment of another company, any change in the plant of the said company,
such as transfer or downsizing of the plant or modification of equipment, may have an impact on the production
capacity of our Liquid Paraffin & Sulfonates division.
In addition, the Company produces liquid paraffin and sulfonate only at the Chiba Plant. If a serious problem
occurs at the plant and then the plant’s operation is suspended for a long period of time, the supply of products may
temporarily stop. The amount of stock at the plant is for about 1.0 months.
In response to these risks related to manufacturing of products, the MORESCO Group has taken initiatives toavoid the occurrence of the risks and minimize the damage if they occur, such as formulating a business continuity planfor each site, carrying out periodic maintenance and inspection of equipment, and conducting disaster drills.

―13―

(4) Product quality
The MORESCO Group strives to maintain and improve the quality and reliability of its products in accordance with strict
internal quality assurance criteria, including acquisition of ISO 9001 certification. However, it is impossible to completely
eliminate all the risks related to quality defects, and there is a risk of a lawsuit, etc. if an unexpected defect arises. In theevent that a quality assurance problem arises with a product of the Group, it will generate costs for compensation andundermine the reliability of the product, leading to a loss of customers, which may eventually affect the businessperformance of the Group. Although the MORESCO Group has insurance against product liability claims, there is no
guarantee that the final amount of compensation to be paid will be completely covered. Therefore, product defects may affectthe business performance and financial position of the Group.
(5) Risks associated with purchase of raw materials
The MORESCO Group’s products are mainly made from lubricants, petrochemicals, and chemical products. These materials
are affected by fluctuations in prices of crude oil and naphtha. The crude oil and naphtha prices may continue to significantly
fluctuate due to the supply-demand trends in Japan or overseas. In the Great East Japan Earthquake, the manufacturing plantsof the raw materials were damaged, which affected our production. Similarly, there is a possibility in the future that a disasteror an accident resulting in supply disruption or consolidation/elimination of businesses on the supplier side may interrupt our
procurement of raw materials.
The Group has responded to the impact of fluctuations of raw material prices by revising prices of the products linked
to crude oil and naphtha prices through negotiations with the major customers of specialty lubricants. We will continue toreflect the price rises in the product prices while also working to reduce costs and promote a shift to high value-added
products. To secure necessary raw materials, we will take measures such as securing suppliers on a global level anddiversifying the materials we use. However, if these measures do not sufficiently work, it may affect the businessperformance of the Group.
(6) Risks related to research and development
The MORESCO Group believes that the development of new products contribute to the improvement of profitability and thefuture growth of the Group, under which we have been investing a large amount of our resources in new productdevelopment. In particular, the 9th Medium-Term Management Plan, which started in FY2021, declares “contributing to therealization of a sustainable society” and “increasing the added value of our business and accelerating expansion to new
business areas” in the Corporate Policies, and it focuses on the environment, information, energy devices, and life science as
the four priority fields for the Group’s research and development.
Under these policies, the R&D department and sales divisions keep close contact with each other and work to properly
identify the market needs and achieve research results as soon as possible by using internal and external networks (people,
technologies, etc.). However, if we fail to obtain appropriate profits in return for the investment made, it may affect thebusiness performance and financial position of the Group.
(7) Patent application
Our basic policy is to apply for patents for all new technologies that the Group has developed. However, for patents related
to a production method, etc. of which infringement is difficult to find or patents related to specialty lubricants, etc. of which
blending know-how may be leaked to competitors if the composition is disclosed in patents, we may refrain from filing anapplication to protect confidentiality. This means that if a competitor applies for a patent on any of the matters above, thepatent may be granted. In preparation for such a situation, the Company has decided to keep records of the implementationof such matters within the company so that we will be able to claim a non-exclusive license based on the right of prior use.
(8) Legal regulations
Major legal regulations and administrative guidance that regulate products and business sites of the Company are as follows.
New laws, regulations, ordinances, etc. or revisions thereto may have an impact on the business performance of the Group.
・ Act on the Regulation of Manufacture and Evaluation of Chemical Substances
・ Industrial Safety and Health Act
・ Fire Service Act
・ Water Pollution Prevention Act
・ Act on Waste Management and Public Cleansing
・ Act on the Prevention of Disaster at Petroleum Industrial Complexes and Other Petroleum Facilities
Due to the growing public awareness of environmental issues, additional revisions to the Water Pollution Prevention
Act and the Act on Waste Management and Public Cleansing are likely. If regulations on disposal of waste and water fromour plants are tightened, the development of a method for internal treatment within plants and the investment in equipment
for waste water treatment will become necessary, which may affect the business performance and the financial position of
the Group.

―14―(9) Risks related to compliance
The MORESCO Group has established the Compliance Policy, aiming to ensure that all the employees and executives
engage in corporate activities in accordance with the Management Philosophy and the MORESCO Corporate Behavior
Charter and thereby become a company supported by its stakeholders. Based on this Policy, systems to ensure compliance
have been developed and promoted. We also work to maintain and improve the compliance systems by conducting internal
audits on our Group companies.
If a serious violation of a law or regulation occurs despite these efforts, it may deteriorate our social credibility, etc. andaffect the business performance and financial position of the Group(10) Information security
In recent years, many cases of leakage of information owned by companies have occurred due to cyber attacks, unauthorizedaccess, computer virus infection, etc. The Company is working to prevent the leakage by implementing measures such as
establishing the Information Security Policy and related regulations, introducing products with information security
measures applied, and providing information security education programs for both executives and regular employees.
However, if leakage of information occurs due to an unexpected situation, it may deteriorate our social credibility, etc.
and affect the business performance and financial position of the Group.
(11) Risks related to valuation of inventories
The Company applies the Accounting Standard for Measurement of Inventories. If we determine that our profitability has
declined due to a rapid change in the market environment or other reason and record a valuation loss on the inventories wehold, it may affect the business performance and financial position of the Group.
(12) Risks related to impairment loss on fixed assets
The Company applies the Accounting Standard for Impairment of Fixed Assets. If an impairment loss is recorded on our
fixed assets due to a decline in profitability as a result of significant deterioration of the business environment or a fall ofmarket prices, etc., it may affect the business performance and the financial position of the Group.

3.

Analysis of Financial Position, Operating Results, and Cash Flows by Management(1) Overview of operation results
The overview of the financial position, operating results, and cash flows (hereinafter, “the operating results, etc.”) of the
MORESCO GROUP (the Company and its consolidated subsidiaries and equity method affiliates) of the consolidated fiscal
year under review is as follows:i)

Financial position and operating results
During the consolidated fiscal year under review, the Japanese economy was on a recovery trend due to recovery inconsumer spending and other factors. In the world economy, amid rising inflationary pressures, the United States andEuropean countries shifted to tightening their monetary policies. Under such financial condition, the dollar-yen exchange rate
wildly fluctuated. In China, the economy was depressed by the strict restrictions on movement under the zero-COVID policy
and the confusion due to the rapid spread of infection after the end of the policy.
Under these circumstances, our financial position and operating results of the fiscal year under review are as follows.
a.

Financial position
Total assets as of the end of the fiscal year under review were 32,017 million yen, an increase of 3,009 million yen fromthe end of the previous consolidated fiscal year. This was mainly due to increases of 752 million yen in trade receivables,
979 million yen in inventories, and 537 million yen in investments and other assets.
Liabilities increased by 2,321 million yen from the end of the previous consolidated fiscal year to 10,778 million
yen. This was mainly due to increases of 836 million yen in trade payables and 1,822 million yen in short-termborrowings and a decrease of 244 million yen in income taxes payable.
Net assets increased by 688 million yen from the end of the previous consolidated fiscal year to 21,240 yen. This was
mainly due to increases of 242 million yen in retained earnings and 373 million yen in foreign currency translation
adjustment.

b.

Operating results
Net sales of the consolidated fiscal year under review were 30,333 million yen, a 11.1% increase year on year, due to theadjustment of selling prices in line with the soaring raw material prices. However, due to a time lag in adjustment ofselling prices, both operating profit and ordinary profit decreased to 523 million yen (down 63.5% year on year) and
1,046 million yen (down 48.0% year on year), respectively. In addition, partly due to the non-existence of an
extraordinary income item of the previous fiscal year (gain on sale of non-current assets of 833 million yen), profit
attributable to owners of parent decreased by 66.0% year on year to 615 million yen.

―15―

Operating results by segment are as follows.
Japan
Overall, revenues increased due to the correction of selling prices. The status of sales by business sector is as follows.
In the Specialty Lubricants sector, although the volume of automobile production in Japan exceeded the level of theprevious year, our sales volume decreased from the previous year due to the impact of a decrease in production volume ofmajor customers. In the Hot Melt Adhesive sector, sales volume increased from the previous year due to acquisition of
new orders for adhesive applications, in addition to the stable performance of the mainstay products for hygiene materials.
In the Liquid Paraffin & Sulfonates sector, the sales volume of products for polystyrene plasticizers decreased due to theimpact of a large-scale periodic repair, etc. at customer plants. In the Synthetic Lubricants sector, sales of both hightemperature lubricating oils and hard disk surface lubricants declined from the previous year due to the impact of
inventory adjustment at customers and the impact of a slowdown in investment at data centers, respectively.
As a result of the above, net sales to external customers of this segment were 19,637 million yen (up 6.8% year onyear), but segment profit was 33 million yen (down 96.0% year on year) due to the impact of soaring raw material prices,
etc.
China
Sales of Specialty Lubricants increased due to the correction of selling prices and the weakening of the yen. Sales of Hot
Melt Adhesive decreased as demand for use for air purifier filters slowed down.
As a result, net sales to external customers of this segment were 3,814 million yen (up 5.2% year on year), butsegment profit was 311 million yen (down 28.2% year on year) due mainly to the impact of soaring raw material prices.
Southeast/South Asia
The sales volume of Specialty Lubricants increased from the previous fiscal year due to recovery in demand, andrevenues also increased due to the correction of selling prices and the weakening of the yen. Sales of Hot Melt Adhesive
increased due to increases in the volume in India and Indonesia.
As a result, net sales to external customers of this segment were 5,870 million yen (up 30.4% year on year) withsegment profit of 123 million yen (up 42.7% year on year).
North America
Although the volume decreased due mainly to the impact of a decline in the operating rate of Japanese automobile
manufacturers in Mexico, sales increased due to the correction of selling prices and the weakening of the yen.
As a result, net sales to external customers of this segment were 1,011 million yen (up 28.1% year on year), butsegment profit was 87 million yen (down 18.6%) due to the impact of soaring raw material prices, etc.
ii)

Cash flows
Cash and cash equivalents at the end of the consolidated fiscal year under review increased by 532 million yen from the endof the previous consolidated fiscal year to 4,186 million yen. Cash flow conditions are as follows.
Net cash provided by operating activities was 515 million yen (net cash provided of 2,333 million yen in the previousyear). This is mainly due to profit before income taxes.
Net cash used in investing activities was 1,172 million yen (net cash provided of 603 million yen in the previous year).
This is mainly due to purchase of property, plant and equipment.
Net cash provided by financing activities was 1,227 million yen (net cash used of 2,937 million yen in the previousyear). This is mainly due to a net increase in short-term borrowings.

iii) Production, orders, and sales resultsa. Production results
Production results for the consolidated fiscal year under review by segment are as follows:
Consolidated fiscal year under review(From March 1, 2022 to February 28,
2023)

Year-on-year change(%)

Japan (millions of yen)

18,366

108.7

China (millions of yen)

2,754

90.4

Southeast/South Asia (millions of yen)

6,870

118.9

272

123.0

28,261

108.9

Segment

North America (millions of yen)
Total (millions of yen)
(Note) Amounts are calculated based on selling prices.
b.

Order results
Since the MORESCO Group’s chemicals business is mainly make-to-stock production, order results are not stated.

c.

Sales results
Sales results for the consolidated fiscal year under review by segment are as follows:―16―

Consolidated fiscal year under review(From March 1, 2022 to February 28,
2023)

Year-on-year change(%)

Japan (millions of yen)

19,637

106.8

China (millions of yen)

3,814

105.2

Southeast/South Asia (millions of yen)

5,870

130.4

North America (millions of yen)

1,011

128.1

30,333111.1

Segment

Total (millions of yen)
(Notes)1.
2.

Previously, net sales by segment were stated including intersegment sales. Starting from this fiscal year, however, wehave changed the method to state only net sales to external customers.
Sales results by our major customer and their ratio to total sales results in the previous consolidated fiscal year andthe consolidated fiscal year under review are as follows.

Major customer

Matsumura Oil Corporation

Previous consolidated fiscal year
(From March 1, 2021 to February 28,
2022)
Value (millions ofRatio (%)
yen)
4,354

15.9

Consolidated fiscal year under review(From March 1, 2022 to February 28,
2023)
Value (millions ofRatio (%)
yen)
4,809

15.9

(2) Analysis and discussion on operating results by management
The following is a summary of the MORESCO Group’s awareness, analysis, and discussion on its operating results from the
management’s perspective.
Matters discussed in relation to the future reflect the judgment as of the end of the consolidated fiscal year under review.
i)

Awareness, analysis, and discussion on financial position and operating results
Regarding the Group’s operating results for the consolidated fiscal year under review, net sales were 30,333 yen (up 11.1%
year on year). This was mainly due to the rise in overall selling prices, an increase in sales of hot melt adhesives inIndonesia, and a recovery in demand for specialty lubricants in Southeast Asia. In terms of profit, due to a rise in the cost rate
resulting from the soaring raw material prices, operating profit decreased 63.5% from the previous year to 523 million yen
and ordinary profit decreased 48.0% from the previous year to 1,046 million yen. In addition, partly due to the non-existenceof an extraordinary income item of the previous fiscal year (gain on sale of non-current assets of 833 million yen), profit
attributable to owners of parent decreased by 66.0% year on year to 615 million yen.
Analysis on the financial position is as described in “II Business Overview 3. Analysis of Financial Position, Operating
Results, and Cash Flows by Management (1) Overview of operation results i) Financial position and operating results a.
Financial position.”

ii)

Analysis and discussion on cash flows and information on capital resources and liquidity of funds
During the consolidated fiscal year under review, we purchased property, plant and equipment using the income obtained
from operating activities and financial activities as the financial resources. Details are stated in “II Business Overview 3.
Analysis of Financial Position, Operating Results, and Cash Flows by Management (1) Overview of operation results ii)
Cash flows.”
Regarding the Group’s capital resources and liquidity of funds, necessary funds are secured with funds on hand andborrowings from financial institutions. Regarding funds on hand, in addition to acquiring cash continuously and stably fromoperating activities, we work to promote efficient fund management by consolidating funds of the Group companies. As forborrowings from financial institutions, we have concluded overdraft agreements with major partner financial institutions toensure the liquidity of funds.

iii) Significant accounting estimates and assumptions used therein
The significant accounting estimates and assumptions used therein that we used in preparing the consolidated financial
statements are as stated in “V. Financial Information, 1. Consolidated Financial Statements, etc., (1) Notes to theconsolidated financial statements (Significant accounting estimates).”
The impact of the spread of COVID-19 is as described in “V. Financial Information, 1. Consolidated Financial
Statements, etc., (1) Notes to the consolidated financial statements (Additional information).”―17―iv) Management policy, management strategy, and objective indicators for determining achievement status of management goals
The consolidated fiscal year under review was the second year of the 9th Medium-Term Management Plan (FY2021 to
FY2023). The achievement status of the consolidated fiscal year under review for the target figures at the beginning of thePlan is as follows.
FY ended February 2023 FY ended February 2023 Achievement rate
(Target)(Result)(%)
Net sales (millions of yen)

27,70030,333109.5％

Operating profit (millions of yen)

1,670

523

31.3％

Ordinary profit (millions of yen)

1,870

1,046

55.9％

Profit attributable to owners of parent (millions of yen)

1,070

615

57.4％

Ordinary profit margin (%)

6.8％

3.4％

―

(Note) Targets are the figures released on February 22, 2021.
The target figures for FY2023 are as stated in “II Business Overview, 1. Management Policy, Business Environment, Issues
to be Addressed, etc., (3) Objective indicators for determining achievement status of management goals,” and the issues to beaddressed for their achievement are as stated in “II Business Overview, 1. Management Policy, Business Environment, Issues
to be Addressed, etc., (2) Business environment, management strategy, and priority business and financial issues to beaddressed.”4.

Material Business Agreements, etc.
Not applicable.

―18―

5.

Research and Development Activities
The MORESCO Group actively engages in research and development activities in order to respond to the increasingly
diversifying customer needs and contribute to the realization of a sustainable society, as well as to create businesses in new fields.
Based on the technologies to add advanced functions through refining, synthesis, modification, and blending of raw materials andto evaluate product characteristics that satisfy customer requirements, the Group is promoting research and development in eachfield of specialty lubricants, synthetic lubricants, hot melt adhesives, and new business development with a view to a carbon
neutral society. Our R&D bases are placed in Japan. Engineers are sent from Japan to China, Southeast Asia, and the U.S. toconduct local-based product development while encouraging collaborations between segments. We have established a system that
promotes improvement of local development capabilities and enables prompt development at each site.
Mainly at our Head Office Research Center, we have an R&D Department related to each business division and the
Corporate R&D Department in charge of new business development, and we promote development of new materials, newtechnologies, and new products and improvement development for existing products in each of the fields of environment,
information and electronics, energy device, and life science. We have 101 research and development staff members, which
account for 12.9% of all employees.
The main themes, results, and expenses for research and development of each segment for the consolidated fiscal year underreview are as follows. The total amount spent for research and development for the consolidated fiscal year under review was
1,246 million yen.
(1) Japan[Specialty Lubricants]
Mainly in the development section of each field placed within the Functional Fluids Division, research and development isconducted on die casting fluids, fire-resistant hydraulic fluids, lubricant for hot forging, metal working fluids, etc.
Efforts are focused on development of new products that can contribute to reducing environmental impact, resourcessaving and recycling toward realizing a sustainable society, establishment of basic technologies using IoT/AI and sensors,
and the development of peripheral equipment capable of extending life or reducing the amount of use of fluids.
For die casting fluids, we have completed the development of products that can be used with minimum quantity spray to
improve the environment in plants and can improve the quality and productivity. In the future, we will promote thedevelopment of new products of minimum quantity spray type, which can contribute to the shift to EVs and weight reductionof automobile manufacturers. We will also advance the development of the spray simulation technologies to realize andsupport efficient minimum quantity spray.
In the field of fire-resistant hydraulic fluids, as the top manufacturer of water-glycol hydraulic fluids in Japan, we areaccelerating initiatives to protect the environment. In addition to brushing up the recycling system for collecting mainelements from deteriorated hydraulic fluids and reusing them, we are promoting the development of an automatic monitoring
system to extend the life of hydraulic fluids to reduce waste, thereby contributing to the reduction of environmental impact.
In the field of lubricants for hot forging, we promote the development of white-type lubricants, which can replacegraphite, and have succeeded in the development of lubricants that can be used in processes with particularly short cycle
times. We are promoting initiatives in the aluminum forging field, to which application is expected due to the ongoing trendof weight reduction of automobiles.
For metal working fluids, we are working to sophisticate the core technologies for water soluble cutting fluids, which
can contribute to raising environment-friendliness and improving productivity. At the same time, we are working on thedevelopment of an automatic monitoring system to realize long-life working fluids, with the aim of stabilizing the metal
working performance and contributing to reducing waste and then to reducing environmental impact.
[Synthetic Lubricants]
In the R&D Department, Synthetic Lubricants, we conduct research and development on hard disk surface lubricants, grease
base oils for hard disk drive internal parts, specialty fluids for semiconductor manufacturing equipment, etc. With our uniquemolecular structure design and synthesis/refining know-how, we focus on developing one-of-a-kind products.
In the field of hard disk surface lubricants, major disk manufacturers are beginning to introduce new chemicalcompounds that can achieve lower floating level (smaller gap) necessary to further increase the recording density. While
working to enhance the basic manufacturing technologies to stabilize the quality, we are also focusing efforts on molecular
design of new compounds that satisfy the required characteristics of the next-generation hard disk. Specifically, we arecontinuing the development of lubricants with new structures that have excellent durability and heat resistance required for
microwave-assisted magnetic recording (MAMR) and heat-assisted magnetic recording (HAMR), which are expected to behigh-capacity magnetic recording media.
For specialty fluids for hard disk drive internal parts and semiconductor manufacturing equipment, we are working on
the development of highly refined fluids by thoroughly eliminating low-volatility components, which are disliked as thecause of outgassing, and their market evaluation is now advancing.
In addition, aiming to build new businesses, we have ventured to the field of material development and synthesis ofadditives using biomass materials. We will develop highly unique, high-performance additives in line with the market trends
and requirements, such as lubricity and conductivity, contributing to a sustainable society. At the same time, we will continue
to focus efforts on the design of new raw materials and additives and development of new products, which have functions
different from commercially available materials, through collaboration with other divisions and Group companies using thesynthesis technologies.

―19―Hot Melt Adhesive
The R&D Department placed within the Hot Mel Adhesive Division conducts development of low-odor adhesives with novolatile organic compounds (VOC), which are friendly to the environment and human health, as well as the development of
new products, such as low-temperature coating-type adhesives that can realize energy saving and adhesives that may
overcome the lack of heat resistance, a weak point of hot melt adhesives.
For the hygiene products industry, one of our major markets, along with our customers’ business expansion overseas,
we promote the development of new products using locally procurable materials while continuing to provide technicalsupport for local production sites. For products in the hygiene products market, such as disposal diapers, we have developed
the technology to reduce the odor of hot melt adhesives, to respond to the need for low-odor products, and the technology of
low-quantity application-type hot-melt adhesives, which can have sufficient adhesion with a small amount of application, byimproving the adhesive interface analysis technology. We have thus made efforts to develop new products that can bring agreater sense of security to users.
Furthermore, in response to the growing global awareness of environmental issues in recent years, as well as the active
discussions on effective utilization of biomass, which is considered to be useful in the effective use of resources or thecreation of a recycling-oriented society, we have increased products that can contribute to achieving carbon neutrality andhave unique functional features so as to offer a product lineup in line with the diversity in customers. We have also
succeeded in improving the performance of reactive-type hot-melt adhesives for automobile interiors, which were adopted
by our new customer automobile manufacturers. Hot-melt adhesives do not contain organic solvents and are friendly tohuman health and the environment. In addition to that, we are planning to develop adhesives that are made of biomassderived raw materials.
New Business Development
Focusing on the environment, information and electronics, energy devices, and life science as keywords, we continue to
conduct various kinds of research and development with the aim of creating new businesses.
In the energy device field, we develop and sell products centering on organic EL device sealants. We are also promoting
the development of sealants for flexible-type devices, micro LEDs, and perovskite solar cells, which are expected to be nextgeneration organic devices, and they are undergoing customer evaluation. In addition, we continue to be engaged in sales andcontract analysis of gas & vapor transmittance measurement devices for films, etc. used for flexible-type devices, and wehave increased achievements mainly in Japan. Furthermore, we are also advancing the development of new equipment
capable of measuring hydrogen transmittance.
Regarding organic photovoltaics (OPV), through cooperation with overseas manufacturers on products or materials, wehave started sales, taking advantage of roll-to-roll processing that enables our own trial production.
In the life science sector, in cooperation with multiple universities and research institutions, we are advancing drug
discovery research on an activating agent of autophagy, a homeostatic function inside cells, which is considered to have arelationship with various lifestyle-related diseases that worsen with aging. Moreover, we have developed our unique
nanoemulsion technology, which can significantly increase absorbability of various types of drugs. It was first applied tocosmetics ingredients, and research and development are advancing toward commercialization. As for development of othernew businesses, besides the above development themes, we are advancing development for manufacturing of nonpetroleum/coal-derived oils from biogas, based on a long-term management plan. We are also conducting various kinds ofresearch and information analysis activities, continuously incubating new projects.
The amount spent for research and development related to the Japan segment is 1,146 million yen.
(2) China, Southeast/South Asia, and North America
Mainly regarding die casting fluids and metal working fluids, we are focusing efforts on development of products that meet
local needs. Our R&D staff members are stationed to help enhance the local development systems. For die casting fluids, we
promote sharing of our development know-how of a leading company and advance product development tailored to local
needs in a timely manner, with the aim of increasing market share, including local users. For metal working fluids, we
promote sharing of our core technologies we have cultivated in Japan in the development of water-soluble cutting fluids,
thereby advancing the development of new products that meet local needs.
The amount spent for research and development related to the China, Southeast/South Asia, and North America
segments is 100 million yen.

―20―

III Equipment and Facilities
1.

Capital Expenditures
The MORESCO Group makes capital investment mainly for the purpose of streamlining and maintenance of production
equipment and enhancing research and development capacity. In the consolidated fiscal year under review, capital expenditures(including property, plant and equipment, and intangible assets) totaled 1,318 million yen.
Major capital expenditures of the MORESCO Group are as follows:Japan
At Ethylene Chemical Co., Ltd., 425 million yen was spent mainly for construction of a new administration building.
China
At MORESCO (ZHEJIANG) FUNCTION MATERIAL CO., LTD., 459 million yen was spent for the construction of a plantfor production of specialty lubricants.

2.

Major Equipment and Facilities
Major equipment and facilities of the MORESCO Group (the Company and its consolidated subsidiaries) are as follows.
(1) The Company (reporting company)
As of February 28, 2023
Book value (millions of yen)
Business site
(Location)

Segment

Type of
Machinery,equipment/facility Buildings and equipment
structuresand vehicles
R&D
equipment
957
8
Officeequipment

Head Office andResearch Center(Chuo-ku, Kobe)

Japan

Chiba Plant(Ichihara, Chiba)

Japan

Production
equipment

457

Akoh Plant(Akoh, Hyogo)

Japan

Production
equipment

446

Land
(Area m2)

Leased assets

Other

Total

Number of
employees(Persons)

252(5,000.03)

9

211

1,436

164

239

297
(28,492.20)

―

58

1,053

55

306

779
(39,863.38)

―

43

1,574

96

(Note) Book value for “Other” represents the total amount of tools, furniture and fixtures; construction in progress; and software,etc.
(2) Subsidiaries in Japan

Company
nameBusiness site
(Location)

Ethylene
ChemicalCo., Ltd.

Head Office
Plant(Ichihara,
Chiba)

Segment

Japan

As of February 28, 2023
Type ofequipment/f Buildings and Machinery,equipment
acility
structuresand vehicles
Productio
n755
380
equipmentBook value (millions of yen)
Land
(Area m2)
470
(22,733.15)

Leased assets

76

Other

49

(Note) Book value for “Other” represents the total amount of tools, furniture and fixtures; and software, etc.

―21―

Total

1,730

Number of
employees(Persons)50

(3) Subsidiaries outside Japan

As of February 28, 2023
Book value (millions of yen)Company name

Type ofBusiness site
Segment equipment/f Buildings Machinery,(Location)andequipment
acility
structures and vehicles

Land
Area
(㎡)

Value

Leasedassets

Other

Total

Number of
employees(Persons)

MORESCO(Thailand)
Co.,LTD.

Head Office
PlantSoutheast/ Production(Chonburi, South Asia equipment
Thailand)

167

33

8,700

60

37

39

336

81

PT.MORESCO
INDONESIAHead Office
PlantSoutheast/ Production(Karawang, South Asia equipment
Indonesia)

95

67

11,000

45

―

2

208

49

PT.MORESCO
MACROADHESIVE

Plant(Serang,Indonesia)

3

124

―
［5,000］

―

―

15

142

41

513

249

―
［25,012］

―

3

187

953

38

444

364

―
［25,651］

―

―

203

1,011

30

Southeast/ Production
South Asia equipment

TIANJIN
MORESCOTECHNOLOGYCO., LTD.

Head Office
Plant
Production
China(Tianjin,equipment
China)
Head Office
MORESCOPlant
HM&LUB
Southeast/ Production
Ahmedabad,
INDIA PRIVATESouth Asia equipment
Gujarat,
LIMITED
India(Notes)1.
2.

3.

Book value for “Other” represents the total amount of tools, furniture and fixtures; construction in progress;
software; and leasehold rights.
Figures in brackets [ ] indicate the areas leased from lenders other than consolidated companies.

Plans for Additions and Disposals of Facilities
Plans for building, etc. of important equipment and facilities as of the end of the consolidated fiscal year under review are as
follows.
There are no plans for disposal of important equipment and facilities.
Scheduled start andcompletion

Planned investment amount
Name ofcompany/busine
ss siteMORESCO
Corporation
Head Officeand ResearchCenter
MORESCO
Corporation
Chiba Plant

MORESCO
Corporation
Akoh Plant

MORESCO(ZHEJIANG)
FUNCTION
MATERIAL
CO., LTD.

Location

Chuo-ku,
Kobe

Ichihara,
Chiba

Akoh, Hyogo

Haining,
Jiaxing,Zhejiang,
China

Segment

Japan

Japan

Japan

China

Type ofequipment/facility

R&D
equipment
Streamlining,
maintenanceand renewal of
production
equipment for
liquid paraffinand sulfonate
Streamlining,
maintenanceand renewal of
hot melt
adhesive
production
equipment
Streamlining,
maintenanceand renewal of
lubricantproduction
equipment
Plant
construction

Total(Millions ofyen)AmountFunding method
already paid
(Millions of
yen)

Start

Capacity to be
added uponcompletion
Completion
(%)

109

―

Funds onhand

March 2023 February 2024

―

308

―

Funds onhand

March 2023 August 2024

―

62

―

Funds onhand

March 2023 February 2024

―

71

―

Funds onhand

March 2023

May 2024

―

1,860

479

Funds onhand andloans

December2022

November
2023

20,000 t/year―22―IV. Information on the Reporting Company
1.

Information on the Company’s Shares, etc.
(1) Total number of shares, etc.
i) Total number of shares
Type

Total number of shares authorized to be issued

Common shares

20,000,000
Total

ii)

20,000,000

Issued shares
Number of issued
sharesas of the end of fiscal
year(February 28, 2023)

Type

Number of issued
sharesas of the reporting
date(May 30, 2023)

Common shares

9,696,500

9,696,500

Total

9,696,500

9,696,500

Stock exchange on which theCompany is listed or financial
instruments association where theCompany is licensed
Tokyo Stock Exchange
Prime Market

Description

Number of sharesconstituting one unit of
stock
100

―

―

(2) Information on share acquisition rights, etc.
i) Details of stock option program
Not applicable.
ii)

Details of rights plan
Not applicable.

iii) Information on other share acquisition rights, etc.
Not applicable.
(3) Information on exercise of moving strike convertible bonds with share acquisition rights
Not applicable.
iv) Changes in the total number of issued shares, capital stock, etc.

Date

Increase/decrease in total Shares issued
number ofand outstanding
issued shares(shares)(shares)

Increase/decrease incapital stock(Millions ofyen)

Increase/
Balance ofBalance of legal
decrease in legal
capital stock
capital surplus
capital surplus(Millions of(Millions of(Millions of
yen)
yen)
yen)

June 28, 2018
20,7009,696,50020
2,118(Note)(Note) Third-party allocation as restricted stock-based compensation
Allocation to: Six Directors (excluding Outside Directors)
Issue price: 1,928 yen
Capital incorporation: 964 yen
Total paid-in amount: 40 million yen (contribution in kind of monetary compensation claim)

―23―

20

1,906

(5) Composition of issued shares by type of shareholder

As of February 28, 2023

Status of shares (one unit of stock: 100 shares)
Category

Financial
Foreign corporations, etc.
Governments
Financial instruments
Other
and
institutions business corporations
Nonmunicipalities
Individuals
operators
individuals

Number ofshareholders
Shares held
(units)Percentage ofshares held(%)

Individuals
and others

Total

Less-than-oneunit shares(shares)

－

10

14

111

52

14

13,84014,041

―

－

9,611

1,004

29,533

3,113

72

53,54696,879

8,600

－

9.92

1.03

30.48

3.21

0.07

55.27

100.00―(Note) 468,970 shares of treasury stock are included in the listings of 4,689 units in “Individuals and others” and 70 shares in “Lessthan-one-unit shares.”(6) Major shareholders

Name

Address

As of February 28, 2023
Percentage ofshares held to the
Shares held
total number of(Thousands ofissued sharesshares)(excluding
treasury shares)(%)

Matsumura Oil Corporation

2-8-5 Nishitenma, Kita-ku, Osaka

1,067

11.5

COSMO Oil Lubricants Co., Ltd.

1-1-1 Shibaura, Minato-ku, Tokyo

503

5.4

5-5-3 Minatojimaminamimachi, Chuo-ku, Kobe

410

4.4

2-11-3 Hamamatsucho, Minato-ku, Tokyo

394

4.2

STARLITE Co., Ltd.

4-23-7 Ohmiya, Asahi-ku, Osaka

326

3.5

Nippon Soda Co., Ltd.

2-2-1 Otemachi, Chiyoda-ku, Tokyo

323

3.5

Mizuho Bank, Ltd.
(Standing proxy: Custody Bank ofJapan, Ltd.)

1-5-5 Otemachi, Chiyoda-ku, Tokyo
(1-8-12 Harumi, Chuo-ku, Tokyo)

250

2.7

MUFG Bank, Ltd.

2-7-1 Marunouchi, Chiyoda-ku, Tokyo

250

2.7

Osaka Small and Medium Business
Investment & Consultation Co., Ltd.

3-3-23 Nakanoshima, Kita-ku, Osaka

209

2.2

Shima Trading Co., Ltd.

2-12-14 Ginza, Chuo-ku, Tokyo

165

1.7

3,898

42.2

MORESCO Employee Stock
Ownership Plan
The Master Trust Bank of Japan,
Ltd. (Trust account)

Total

―

(Note) Of the number of shares held by The Master Trust Bank of Japan, Ltd. (trust account) above, 394,000 shares are related totrust business.

―24―

(7) Information on voting rightsi) Issued shares
Category

As of February 28, 2023
Number of
voting rights

Number of shares

Shares without voting rights
Shares with restricted voting rights(treasury shares, etc.)
Shares with restricted voting rights(others)
Shares with full voting rights(treasury shares, etc.)
Shares with full voting rights(others)

Common shares

―

―

―

―

―

―

―

―

―

468,900――

92,190

―

―

―

―

―

Common shares
9,219,000
Common sharesLess-than-one-unit shares

8,600

Total number of issued shares

Description

9,696,500

Total number of voting rights held―
92,190―by all shareholders(Note) Common shares of “Less-than-one-unit shares” include 70 shares of treasury stock held by the Company.
ii)

Treasury shares, etc.
Number ofshares held
under own
name(shares)

As of February 28, 2023
Percentage of
Number ofshares held toshares held Total number of
the total
under anothershares heldnumber ofname(shares)issued shares(shares)(%)

Shareholder nameShareholder address

MORESCO Corporation

5-5-3 Minatojimaminamimachi,
Chuo-ku, Kobe

468,900－

468,900

4.8

Total

―

468,900－

468,900

4.8

―25―

2.

Information on Acquisition of Treasury Shares, etc.
Type of shares

Acquisition of common stock under Article 155, Item 3 of the Companies Act(1) Acquisition by resolution of General Meeting of Shareholders
Not applicable.
(2) Acquisition by resolution of Board of Directors
Acquisition of treasury shares in accordance with the provision of the Articles of Incorporation under Article 459, Paragraph
1 of the Companies Act
Category

Number of shares

Status of resolution at the Board of Directors meeting(July 13, 2022)(Acquisition period: July 14, 2022 to July 14, 2022)

Total price (yen)180,000

216,000,000－－

162,000

194,400,000

Total number and price of remaining resolved shares

18,00021,600,000

Unexercised ratio as of the end of the fiscal year underreview (%)

10.0

10.0

－

－

10.0

10.0

Treasury shares acquired before the fiscal year underreview
Treasury shares acquired during the fiscal year underreview

Treasury shares acquired during the current period
Unexercised ratio as of the reporting date (%)(3) Acquisition not based on resolution of the General Meeting of Shareholders or of the Board of Directors
Not applicable.
(4) Status of the disposition and holding of acquired treasury sharesFiscal year under review
Category
Number of shares
Acquired treasury shares for which
subscribers were solicited
Acquired treasury shares that were
disposed ofCurrent period

Total amountdisposed(Yen)

Number of shares

Total amountdisposed
(Yen)

－

－

－

－

－

－

－

－

Acquired treasury shares transferred
due to merger, share exchange, sharedelivery or split

－

－

－

－

Other
(disposal of treasury shares as
restricted stock-based compensation)

9,600

12,201,600－－

Total number of treasury shares held

468,970－

468,970－(Note) The number of treasury shares held during the current period does not include less-than-one-unit shares purchased from May
1, 2023 to the reporting date of this Annual Securities Report.

―26―

3.

Dividend Policy
The Company’s basic policy for profit distribution is to secure necessary internal reserves for future business expansion andenhancement of management structure while returning profits to its shareholders in consideration of business performance, etc.
In principle, the Company pays dividends from surplus twice a year: interim dividend and year-end dividend.
The decision-making bodies for these dividends from surplus are the General Meeting of Shareholders for the year-end
dividend and the Board of Directors for the interim dividend.
The Articles of Incorporation stipulate that the Company may pay dividends from surplus by resolution of the Board of
Directors in accordance with the provision of Article 459, Paragraph 1 of the Companies Act.
Based on the above policy, we have decided to pay a dividend per share of 40.00 yen (including 20 yen for interim dividend)
for the fiscal year under review. As a result, dividends from surplus for the fiscal year under review amounted to 369 million yen.
Internal reserves will be used for responding to changes in the economic environment and market, capital investment toenhance cost competitiveness, reinforcing technology and production structures to respond to market needs, launching overseas
strategies, and active promotion of research and development.
Dividends from surplus for the fiscal year under review are as follows.
Date of resolution

Total dividend amount(Millions of yen)

October 13, 2022
Resolution of the Board of Directors
May 30, 2023
Resolution of the Ordinary General
Meeting of Shareholders―27―

Dividend per share
(Yen)
185

20

185

20

4.

Corporate Governance, etc.
(1) Overview of corporate governancei) Basic policy on corporate governanceI. The Company will always pursue the best corporate governance and make continuous efforts for the enhancement thereof.
II. The Company believes that the basis of corporate governance is that communication in all directions within the Company
is in a good condition and/or active. In other words, corporate governance functions effectively when policies, strategies,
plans, instructions, etc. are communicated accurately, properly, and smoothly, while results and the implementation status
are reported correctly. Based on this belief, the MORESCO Group recognizes the strengthening of corporate governanceas an important management issue. By developing and enhancing the systems therefor, we will ensure the soundness andtransparency of management while making decisions in a prompt and dynamic manner in response to changes in theenvironment. We believe this is the key to our corporate governance and will work to enhance corporate governance inline with the basic policy below.
i. We respect the rights of shareholders and ensure their equality.
ii. We consider the interests of not only our shareholders but also the Company’s employees, customers, business
partners, creditors, local communities, and various other stakeholders, and we work in cooperation with thesestakeholders in an appropriate manner.
iii. We properly disclose information of the company and ensure transparency in the company’s decision making.
iv. We have constructive dialogue with shareholders who have investment policies consistent with the interests ofshareholders over the medium to long term.
ii)
A.

Overview of the current corporate governance structure and reasons for adopting the current structure
Overview of corporate governance structure
The Company adopts the system of a company with an Audit and Supervisory Committee and appointed five directors(total includes one Outside Director; directors on the Audit and Supervisory Committee are excluded) and four directors
who are Audit and Supervisory Committee members (total includes three outside directors).
The Board of Directors meets once a month in principle, and in addition to monitoring and supervising the executionof business by the company, it also makes decisions on important matters related to management of the company.
Regarding analysis of differences between monthly budgets and actual results, the Board of Directors gives instructions
and guidance based on reports toward achieving planned goals.
The Executive Committee, consisting of executive directors, meets once a month in principle. The committee
discusses the decisions of the President and Representative Director in order to facilitate the smooth execution of businesswhile avoiding excessive concentration of authority.
Additionally, the Company has established a Nomination and Compensation Committee as an advisory body to theBoard of Directors and has established a system to further strengthen corporate governance. Specifically, the appointment
of director candidates and the allocation of remuneration are determined by resolution of the Board of Directors after
deliberation and reporting by the Nomination and Compensation Committee, which includes all independent Outside
Directors.
Furthermore, the Company has introduced an executive officer system with the purpose of realizing more efficientmanagement and swifter decision-making. Management Committee meetings with executive directors, full-time Audit
and Supervisory Committee members, executive officers, etc. are held once a month in principle. These meetings are held
to report on and discuss important matters relating to corporate management and to promote mutual understanding of thecurrent state of corporate management. The contents of these meetings are disclosed and communicated to all employees.
The Compliance and Risk Management Committee is composed of executive directors, full-time Audit andSupervisory Committee members, executive officers, etc., and meets when meetings of the Management Committee areheld in order to establish systems for compliance and risk management and check progress in this regard.
In March 2022, we established the “Sustainability Committee” in order to operate our business based on the“realization of a sustainable society” and “improvement of corporate value in the medium to long term.” In addition, weestablished the Sustainability Promotion Office as a dedicated department to oversee the Group’s promotion ofsustainability. The Sustainability Committee is chaired by the Representative Director and President and consists ofmembers such as the Executive Directors, Audit and Supervisory Committee members, and Executive Officers. The
Committee meets semi-annually to discuss a wide range of risks and opportunities, including social and environmental
issues related to sustainability, and reflect them in business strategies and policies in a timely manner.

―28―

The structure of each institution and committee is as follows. (◎: Chairperson)

Title
Representative
Director, President
CEO
Director
Senior Management
Executive Officer
COO
Director
Managing Executive
Officer
CTO
Director
Senior Executive
Officer
CFO

Director(Full-time Audit andSupervisory
Committee Member)
Director(Audit andSupervisory
Committee Member)
Director(Audit andSupervisory
Committee Member)
Director(Audit andSupervisory
Committee Member)

OutsideBoard ofDirectors

Nomination
Compliance
Executive
andManagement
and Risk Sustainability
Committee Compensation Committee Management Committee
Committee
Committee

Motohisa
Morozumi◎◎

Nobuhiro
Sewaki○Yasuo Sakane

Hirofumi
Fujimoto
Hiroko Fuji

Director

B.

Name

○

Mikio Honda

○

◎

◎

○

◎

○

○

○

○

○

○

○

○

○

○

○

○

○

○

○

○

◎

○

○

Kazuo
Machigaki○○○

Mikio Nakajo

○

○

○

Hidetoshi
Nakatsuka○○○

Reasons for adopting the current structure
The Company has adopted the Company with Audit Committee System for the following reasons.
・ In order to establish a structure that is capable of properly responding to expectations of our stakeholders both insideand outside Japan, the Audit and Supervisory Committee, the majority of whose members are Outside Directors, is
responsible for auditing and supervising the legality and appropriateness of business execution, while the Nomination
and Compensation Committee is formed to ensure higher transparency in management.
・ In order to make prompt and decisive decisions, the authority of the Board of Directors to make business decisions
shall be delegated to the directors, thereby speeding up management decision-making and execution under theappropriate supervision of the Board of Directors and creating a system that allows the Board of Directors to focus on
discussions of corporate strategy and other issues.

―29―

The MORESCO Group’s corporate governance structure is as illustrated below.

MORESCO Group Corporate Governance Structure
General Meeting of Shareholders
Appointment/Dismissal

Appointment/Dismissal

Appointment/Dismissal

Auditing/
Supervision
Accounting Auditors

Advisory

Audit and Supervisory Committee

Board of Directors

Directors on the Audit and Supervisory
Committee

Nomination andCompensation Committee
ReportingDirectors
Selection/Dismissal/
Supervision

Mutual cooperation

Advisory

CEO, President andRepresentative Director

Executive Committee
Reporting

Mutual cooperation

Mutual cooperation
COO, Director and Senior
Management Executive Officer

Auditing
Internal Audit Department
Management Committee
Executive directors,
Audit and Supervisory
Committee members,
executive officers, etc.

Compliance and Risk
Management Committee
Executive directors,
Audit and Supervisory
Committee members,
executive officers, etc.

Sustainability Committee
Executive directors,
Audit and Supervisory
Committee members,
executive officers, etc.

Individual divisions, departments, and affiliated companiesiii) Other matters related to corporate governance
A. Status of establishment of internal control system
The Company has resolved the Basic Policy Regarding Establishment of Internal Control Systems below by the Board of
Directors. According to this policy, the Company has been establishing the systems, and the after-mentioned Complianceand Risk Management Committee Secretariat is responsible for progress management thereof.
a) System to ensure that execution of duties by directors and employees complies with laws, regulations, and theCompany’s articles of incorporationa. We will establish the MORESCO Corporate Behavior Charter as the basis of our compliance systems and willcontinue to ensure that responding to social requirements, including legal compliance, is the basis of all corporate
activities.
b. We will establish a Compliance and Risk Management Committee (chaired by the President and Representative
Director and composed of executive directors, full-time Audit and Supervisory Committee members, executive
officers, etc.) to oversee overall compliance and promote the establishment of compliance systems.
c. In order to promote compliance, we will provide training and other guidance so that directors and employees caneach perceive compliance as a personal responsibility and conduct business operations accordingly.
d. The Audit and Supervisory Committee and the Internal Audit Department will work together to examine compliancesystems, identify any problems with laws and regulations, the company’s articles of incorporation, and/or internal
regulations, and report to the Compliance and Risk Management Committee. The Compliance and Risk
Management Committee will regularly review compliance systems and will endeavor to identify problems and make
improvements.
e. An internal reporting system has been established, with “Internal Reporting System Regulations” that clearly statethat employees of the Company or its subsidiaries will not be treated unfairly if they become aware of and report an
act that is suspected to be improper under laws, regulations, the Company’s articles of incorporation, or internal
regulations. Employees, etc. who treat such reporters unfavorably will be handled in accordance with the
Employment Regulations. Additionally, the presence or absence of any such reports will be reported to theCompliance and Risk Management Committee.
b) System for storing and managing information related to execution of duties by Directors
a. We will appropriately store and manage the following documents (including electromagnetic records) related to
execution of duties by directors in accordance with laws and regulations and the Regulations for Management ofImportant Documents.
i.
Minutes of General Meetings of Stockholders and related materials
ii.
Minutes of meetings of the Board of Directors and related materials
iii. Minutes of Management Committee meetings and related materials
iv.
Other important documents related to execution of duties by directors
b. Information management will be handled in accordance with the Information Security Policy, Regulations forManagement of Confidential Information, and Basic Policy on Protection of Personal Information.
c) Regulations and other systems for managing the risk of loss
a. We will promote the establishment of systems based on the Risk Management Policy, with the aforementioned
Compliance and Risk Management Committee as the primary promoting body, identify risks concerning theCompany and its subsidiaries, and take appropriate risk countermeasures.
b. To prepare for risks that may seriously affect the management of the Company, we will establish an emergency
response headquarters under the direction of the President and Representative Director, in accordance with the Crisis―30―

Management Regulations, and take the necessary measures to minimize losses due to the occurrence of such risks.
d) System to ensure efficient execution of duties by directors
a. Regular meetings of the Board of Directors will take place once a month in principle, with the purpose of making
decisions on important matters and supervising the execution of business by directors.
b. In order to further strengthen the functions of the Board of Directors and improve the efficiency of management, we
will introduce a system of executive officers responsible for business execution functions, with Management
Committee meetings held once a month in principle. These meetings will be attended by executive directors, fulltime Audit and Supervisory Committee members, executive officers, etc., who will discuss basic matters andimportant matters regarding execution of business.
c. Regarding business operations, we will formulate Medium-Term Management Plans and plans for each fiscal year
based on the future business environment outlook, and we will set company-wide goals. In each business division, we
will formulate and execute concrete plans to achieve these goals.
e) System to ensure proper business operations in the corporate group, i.e. the Company and its subsidiaries
a. Management items outlined by periodic reports and prior consultations on important projects will be defined by theManagement Regulations for Affiliated Companies, and departments with jurisdiction over management ofsubsidiary companies will exercise overall management of these companies.
b. The Company’s executive directors, executive officers, and members of the Audit and Supervisory Committee, etc.
will be dispatched as directors or auditors of subsidiary companies. Directors will monitor and supervise theexecution of duties by the directors of subsidiaries. Members of the Audit and Supervisory Committee will audit thebusiness execution of subsidiaries. Additionally, the Internal Audit Department will conduct regular audits ofsubsidiaries.
c. As a fundamental rule, subsidiaries will autonomously establish internal control systems based on the size, businesscharacteristics, institutional specifications, and other company characteristics or distinguishing features, while also
maintaining cooperation and information sharing with the Company.
d. The directors of subsidiaries will, regularly or as needed, report monthly and quarterly business results and otherinformation about business execution at the Company’s Management Committee meetings.
f) System concerning directors and employees who should assist with the duties of the Audit and Supervisory Committee,
and matters regarding independence from other directors for such directors and employees
a. If the Audit and Supervisory Committee requests the placement of employees to assist the Committee with its duties,
this shall be arranged within reason following consultation with the Committee. No directors to assist the Audit andSupervisory Committee will be placed.
b. Independence from directors when making decisions on matters concerning personnel rights, such as appointments ortransfers of such employees, will be ensured by obtaining the prior consent of the Audit and Supervisory Committee.
g) System for directors and employees to report to the Audit and Supervisory Committee, system for other reports to the
Audit and Supervisory Committee, and other systems to ensure that audits by the Audit and Supervisory Committee areconducted effectively
a. Directors, employees, subsidiary directors/employees, and those who receive reports from them must immediately
report any important matters that affect the business or performance of the Company to the Audit and Supervisory
Committee. In accordance with the Internal Reporting System Regulations, employees who make such reports mustnot be treated unfavorably on the grounds of having made such reports.
b. In order for full-time Audit and Supervisory Committee members to fully understand important decision-making
processes and the status of business execution outside of meetings of the Board of Directors, these committee
members are permitted to attend other important meetings, such as Management Committee meetings and meetingsof the Compliance and Risk Management Committee, view key approval documents, contracts, and other important
documents related to execution of business, and ask directors and/or employees for explanations of these asnecessary.
c. Under the independence and authority asserted through the “Audit and Supervisory Committee Regulations” and“Auditing/Supervision Standards of the Audit and Supervisory Committee,” the Audit and Supervisory Committee
will work to achieve audit results in close cooperation with the Internal Audit Department and accounting auditors
while also ensuring the effectiveness of audits.
d. If the Audit and Supervisory Committee or a member of the Committee requests advance payment or redemption of
expenses necessary to perform audits, directors, etc. will comply unless the contents of the audit and/or funds
required are unreasonable.
e. The Company will establish other necessary systems to ensure the effectiveness of audits by the Audit andSupervisory Committee.
h) System for ensuring the reliability of financial reports
a. The Company will establish and operate internal control systems under the direction of the President and Director
and establish relevant regulations to ensure the reliability of financial reports and effectively and appropriately submit
internal control reports as stipulated by the Financial Instruments and Exchange Act.
b. The Company will ensure compliance with the Financial Instruments and Exchange Act and related laws andregulations through continuous evaluation of the proper functioning of internal control systems and making ofnecessary improvements.
i) Basic systems for eliminating antisocial forces
a. Under the MORESCO Corporate Behavior Charter, the basic policy of the Company is to have no relationships ofany kind with antisocial forces or groups that threaten the order and safety of civil society. The Company aims tospread awareness of this basic policy among all directors and employees via the internal network, etc.
b. We will respond resolutely to unreasonable demands and efforts by antisocial forces and groups in line with theRegulations for Countermeasures Against Antisocial Forces.
c. The General Affairs Department will be the department responsible for responses to antisocial forces and groups. Any
unreasonable demands or efforts by antisocial forces and groups will be immediately reported to this department,

―31―

d.

with organizational measures taken to centralize the response.
The above department will maintain close cooperation with the police and other such bodies and will promptly
contact them in the event of any unreasonable demands or efforts by antisocial forces and groups in order to request
appropriate guidance and support in a timely manner.

B.

Status of establishment of risk management system
The Company has established a Compliance and Risk Management Committee that consists of members including
executive directors, full-time Audit and Supervisory Committee members, and executive officers, with the General Affairs
Department and Legal Department serving as the secretariat. In this system, initiatives to enhance risk management andcompliance are promoted.
a) Risk management
Regarding the 17 risk items that should be addressed by the Company, which were extracted from the total 235 risk items
listed up at all business sites, each of the four function-specific meetings, namely, the sales meeting, productionengineering meeting, R&D meeting, and Head Office division meeting, identifies the risk items that each function should
address. We are working to establish and review the systems for checking and management to prevent such risks fromemerging and to enhance the operation thereof. In case of a risk arising, we promote the preparation of an emergency
countermeasures manual for each risk in accordance with the Crisis Management Regulations.
Deliberations and progress at each function-specific meeting are monitored by the secretariat and reported to theCompliance and Risk Management Committee to be properly managed.
As the initiatives to prevent leakage of confidential information, in accordance with laws and regulations and theInformation Security Policy, we have established the Regulations for Management of Confidential Information and theElectronic Information Management Guidelines and promote operation management to prevent leakage of both written
and electronic information through such measures as controlling viewing authority, ID/password management, andrestricting data transfer to external memory media or external cloud services. In addition, we work to ensure that
employees are aware of the importance of information management through internal training and other opportunities.
b) Compliance system
Regarding compliance, we have established the Compliance Regulations, Compliance Promotion Guidelines, andInternal Reporting System Regulations.
Each organization formulates a list of laws and regulations that it should observe, and the status of compliance withthe listed laws and regulations are checked twice a year. The results are gathered by the secretariat and reported to theCompliance and Risk Management Committee. If any problem is found regarding the compliance status, the relevantbusiness site shall prepare an improvement plan and report it to the Compliance and Risk Management Committee.
Discussions and conclusions at the Compliance and Risk Management Committee meeting are reported at the Board of
Directors meeting held in the same month, where Outside Directors give advice as necessary. To prepare for noncompliance with laws and regulations if found, an internal reporting system has been established and operated in which
the company lawyer, full-time Audit and Supervisory Committee members, and General Manager of the Internal Audit
Department will accept reports. Employees are familiarized with the system.
In promoting compliance, we believe that the employees’ awareness of compliance with laws and regulations is
crucial. We therefore provide various education programs, including an e-learning program on insider trading, training
on practical operations for contracts, training programs based on job ranks, such as new employees, mid-career
employees, and management, and training programs based on job functions, such as sales, production, and R&D. We
also conduct education through company newsletters. Compliance awareness surveys for all employees are also
conduced on a regular basis to grasp the Group’s status of compliance. Furthermore, during the fiscal year under review,
we invited an outside lawyer to conduct training on the theme of “prevention of bribery and corruption,” and we also
provided an e-learning program on “handling of trade secrets” as a measure to prevent leakage of trade secrets, with theaim of raising the compliance awareness of the Group’s employees.
Regarding the protection of personal information, including Specific Personal Information (My Number), we haveestablished a management system under the Basic Policy on Protection of Personal Information and the Basic Policy on
Proper Handling of Personal Numbers and Specific Personal Information, and we promote operation thereof byconducting training, etc. on the Act on the Protection of Personal Information for all employees.

C.

Overview of content of limited liability contracts
Pursuant to the provisions of the Articles of Incorporation, the Company has entered into a limited liability contract with
the Outside Directors and the Audit and Supervisory Committee members in accordance with the provision of Article 427,
Paragraph 1 of the Companies Act to limit their liability for indemnity under Article 423, Paragraph 1 of the Act to the
maximum amount stipulated in Article 425, Paragraph 1 of the Act.

―32―

D.

Overview of the content of the directors and officers liability insurance contract
The Company has entered into a directors and officers liability insurance (D&O Insurance) contract prescribed in Article
430-3, Paragraph 1 of the Companies Act with an insurance company. The scope of the insured parties of the insurance
contract is directors, corporate auditors, executive officers, and employees in managerial or supervisory positions. The
insurance premiums are not paid by the insured. The insurance contract will cover any damage that may be incurred inassociation with any liability that directors of the insured bear with regard to the execution of their duties or any claim
filed with regard to such liability. However, in order to ensure that the appropriateness of the execution of duties by the
insured is not impaired, damage attributable to any act conducted with awareness that it is violating any law or regulation
will not be covered.

E.

Director membership
The Company’s Articles of Incorporation stipulate that the number of Directors (excluding Directors on the Audit andSupervisory Committee) shall be no more than eight, and the number of Directors on the Audit and Supervisory
Committee shall be no more than five.

F.

Requirements for director appointment
The Company’s Articles of Incorporation stipulate that resolutions for the appointment of directors shall be approved by amajority of the voting rights of shareholders present at the meeting with attendance of shareholders holding at least onethird of eligible voting rights.
The Articles of Incorporation also stipulate that cumulative voting shall not be used in the appointment of directors.

G.

Matters for resolution of the General Meeting of Shareholders that may be resolved by the Board of Directorsa) Decision-making body for distribution of surplus, etc.
The Company’s Articles of Incorporation stipulate that, unless otherwise stipulated in laws and regulations, distributionof surplus and other matters specified in the items of Article 459, Paragraph 1 of the Companies Act may be decided byresolution of the Board of Directors instead of resolution of the General Meeting of Shareholders. The purpose of this is
to allow flexible return of profits to shareholders. However, year-end dividends shall be decided by resolution of theGeneral Meeting of Shareholders.
b) Exemption of directors from liability
The Company’s Articles of Incorporation stipulate that pursuant to the provision of Article 426, Paragraph 1 of theCompanies Act, liability of directors (including former directors) as stipulated in Article 423, Paragraph 1 of the Act may
be exempted within the legal limit. The purpose of this is to enable directors to fully perform their expected roles.

H.

Requirements for special resolution of the General Meeting of Shareholders
The Company’s Articles of Incorporation stipulate that special resolutions as provided for in Article 309, Paragraph 2 of
the Companies Act shall be approved by two-thirds of the voting rights of shareholders present at the meeting withattendance of shareholders holding at least one-third of eligible voting rights. This is intended to facilitate the smooth
operation of the General Meeting of Shareholders by relaxing the quorum for special resolutions of the General Meetingof Shareholders.

―33―(2) Officersi) List of officers
Male: 8, Female: 1 (Female officers accounting for 11.1%)
Title

Name

Date of birth

Career summary
April 1987
March 1999
March 2007
May 2008
March 2011

May 2011
Representative Director
President
CEO

Motohisa Morozumi

April 23, 1962
January 2012
May 2014

March 2015
May 2017

May 2018
May 2021
April 1982
March 2008
May 2010
March 2015
May 2015
Director
Senior Managing Executive
Officer, COO

Nobuhiro Sewaki

March 23, 1964

May 2016
February 2017
May 2017
May 2018
November 2020
May 2021
October 2003
March 2004
April 2006
October 2007
March 2016
March 2016

Director
Managing Executive Officer,
CTO

Yasuo Sakane

June 7, 1958
June 2016
May 2018

March 2021
May 2021
March 2022

―34―

Joined HBF Japan (currently Sekisui Fuller
Company, Ltd.)
Joined the Company. Section Manager, Tokyo
Sales, Sales Department III
General Manager, Sales Department, Hot Melt
Adhesive of the Company
Executive Officer General Manager, Sales
Department, Hot Melt Adhesive of theCompany
Executive Officer Division Manager, Hot
Melt Adhesive and General Manager, Sales
Department, Hot Melt Adhesive of theCompany
Director and Executive Officer Division
Manager, Hot Melt Adhesive and General
Manager, Sales Department, Hot Melt
Adhesive of the Company
Representative Director, President of
PT.MORESCO MACRO ADHESIVE
Director and Managing Executive Officer
Division Manager, Hot Melt Adhesive andGeneral Manager, Sales Department, Hot Melt
Adhesive of the Company
Director and Executive Officer Division
Manager, Hot Melt Adhesive of the Company
Director and Senior Managing Executive
Officer Division Manager, Hot Melt
Adhesive and Division Manager, Metal
Working Fluids of the Company
Representative Director, President andExecutive Officer, COO
Representative Director, President, CEO of theCompany (current position)
Joined the Company
General Manager, Sales Department,
Functional Fluids Division of the Company
Executive Officer General Manager, Sales
Department, Functional Fluids Division of theCompany
Representative Director, President of
MORESCO (Thailand) Co.,Ltd.
Executive Officer in charge of Southeast Asiaof the Company
Senior Executive Officer in charge ofSoutheast Asia of the Company
Representative Director, President of
MORESCO HM&LUB INDIA PRIVATELIMITED
Director, Senior Executive Officer in chargeof Southeast Asia of the Company
Director, Senior Executive Officer in chargeof overseas of the Company
Chairman, Wuxi More Tex Technology Co.,
Ltd. (current position)
Director, Senior Managing Executive Officer,
COO (current position)
Joined the Company, Special Manager, SSGroup, Corporate R&D Department of theCompany
General Manager, Corporate R&D
Department of the Company
Komag, Inc.TechnicalDirector
Western Digital MediaOperations (currently Western Digital
Corporation) Technologist
Rejoined the Company. Executive Officer
Division Manager, Synthetic Lubricants of theCompany
Executive Officer Division Manager,
Synthetic Lubricants and General Manager,
R&D Department, Synthetic Lubricants of theCompany
Executive Officer Division Manager,
Synthetic Lubricants of the Company
Director and Senior Executive Officer, CTO
Division Manager, Synthetic Lubricants andGeneral Manager, Corporate R&D
Department of the Company
Director and Senior Executive Officer, CTO
General Manager, Life Science R&D
Department of the Company
Director and Managing Executive Officer,
CTO General Manager, Life Science R&D
Department of the Company
Director and Managing Executive Officer,
CTO (current position) of the Company

Term ofofficeShares held
(shares)(Note 2)

29,131(Note 2)

17,730(Note 2)

9,050

TitleName

Date of birth

Career summary
April 2010

May 2022

Syndication Promotion Manager, Products
Distribution Department, Mizuho Corporate Bank,
Ltd. (currently, Mizuho Bank, Ltd.)
Deputy General Manager, Shinjuku Corporate
Banking Department, Mizuho Corporate Bank,
Ltd.
General Manager, Investors Service Department,
Trust & Custody Services Bank, Ltd. (currently,
Custody Bank of Japan, Ltd.)
Senior Manager, Internal Audit Department,
Mizuho Bank, Ltd.
Joined the Company. Deputy General Manager,
Strategy Planning Department
General Manager, Overseas Sales Department,
Hot Melt Adhesive of the Company
Executive Officer in charge of Administrative
Division, CFO of the Company
Executive Officer in charge of Administrative
Division and Safety, CFO of the Company
CFO
Director and Senior Executive Officer, CFO incharge of Administrative Division and Safety of
the Company
Director and Senior Executive Officer, CFO,
(current position) of the Company
Joined Daimaru Co., Ltd. (currently, Daimaru
Matsuzakaya Department Stores Co., Ltd.)
Executive Officer and General Manager, MD
Promotion Department 2, MD Strategy Promotion
Office, Daimaru Matsuzakaya Department StoresCo., Ltd.
Executive Officer and General Manager, MD
Strategy Promotion Office, Independent Business
Unit, Daimaru Matsuzakaya Department StoresCo., Ltd.
Executive Officer and Store Manager, Daimaru
Osaka Umeda, Daimaru Matsuzakaya Department
Stores, Co., Ltd.
Executive Officer and Store Manager, Daimaru
Kobe, Daimaru Matsuzakaya Department Stores,
Co., Ltd.
Executive Officer and Store Manager, Daimaru
Sapporo, Daimaru Matsuzakaya Department
Stores, Co., Ltd.
Executive Officer in charge of Special
Assignments from President, Daimaru
Matsuzakaya Department Stores, Co., Ltd.
General Manager, Ad Tele-support Division, AD
DAISEN Co., Ltd. (current position)
Director of the Company (current position)

April 1986

Joined the Company

March 2007

Section Manager of General Affairs, General
Affairs Department of the Company
Section Manager of Human Resources, Human
Resources Department, Administration Divisionof the Company
Section Manager of Operations, Akoh Plant of theCompany
General Manager, General Affairs Department of
the Company
Director of the Company (Audit and Supervisory
Committee Member) (current position)
Manager of Tokyo Plant, Tocalo Co., Ltd.

July 2012
April 2015
May 2017
Director
Senior Executive Officer, CFO

March 2019
Hirofumi Fujimoto

July 14, 1966
March 2020
January 2021
March 2021
May 2021
March 2022
April 1981
May 2011

September 2011

April 2013
Director

Hiroko Fuji

September 27, 1960

January 2017
January 2020
January 2021
June 2021

March 2010
Director(Full-time Audit and Supervisory
Committee Member)

Mikio Honda

June 21, 1962

March 2012
March 2017
May 2022
July 1995
September 1999
April 2005
June 2005

Director(Audit and Supervisory
Committee Member)

Kazuo Machigaki

May 11, 1951

June 2007
April 2013
June 2013
June 2019
May 2020

Director(Audit and Supervisory
Committee Member)

Mikio Nakajo

March 19, 1963

General Manager of Manufacturing Division,
Tocalo Co., Ltd.
Director, Deputy General Manager of
Manufacturing Division, Tocalo Co., Ltd.
Representative Director and President, Tocalo Co.,Ltd.
President, Tocalo & Han Tai TW Co., Ltd.

June 2011

External auditor, Glory Ltd.

May 2019

Representative attorney, Sawada, Nakajo andMori Law Office (current position)
External auditor, Yamato Kogyo Co., Ltd. (current
position)
Director of the Company (Audit and Supervisory
Committee Member) (current position)
President, Hyogo Bar Association

June 2019
May 2020
April 2022

―35―

(Note 2)

4,742

(Note 2)784

(Note 3)

4,368

(Note 3)

3,903

(Note 3)―

Representative Director and Chairman, Tocalo
Co., Ltd.
Advisor, Tocalo Co., Ltd.

June 2010

April 2005

Shares held
(shares)Manager of Akashi Plant, Tocalo Co., Ltd.

Director of the Company (Audit and Supervisory
Committee Member) (current position)
Registered as attorney, joined the Sawada andKikui Law Office (now Sawada, Nakajo and Mori
Law Office)Partner attorney, Sawada and Nakajo Law Office(now Sawada, Nakajo and Mori Law Office)External auditor, Nishishiba Electric, Co., Ltd.

April 1998

Term ofofficeTitleName

Date of birth

Career summary
April 1983

Hired by the Osaka Regional Taxation Bureau

July 2000

Company Split PT (in charge of notification oforganizational restructuring taxation systems),
Corporation Taxation Division, Taxation
Department, and Large Enterprise
Examination Division, Large Enterprise
Examination and Criminal Investigation
Department, National Tax Agency
Corporate Planning Office, Tax Bureau,
Ministry of Finance (in charge of consolidated
taxation laws) and Large Enterprise
Examination Division, Large Enterprise
Examination and Criminal Investigation
Department, National Tax Agency
International Investigation Director,
Examination Division, First Examination
Department, Osaka Regional Taxation Bureau
Assistant Director, Comprehensive
Investigation Division, First Examination
Department, Osaka Regional Taxation Bureau
Registered as tax accountant, opened
Hidetoshi Nakatsuka Tax Accountant Office,representative (current position)
Special Professor, Graduate School andFaculty of Law, Himeji Dokkyo University
External auditor, Tiger Corporation (current
position)
Director of the Company (Audit andSupervisory Committee Member) (current
position)January 2002

Director(Audit and Supervisory
Committee Member)

Hidetoshi Nakatsuka

July 2009

October 26, 1964

July 2012
August 2013
April 2014
December 2018
May 2020

Total(Notes)

1.
2.
3.
4.

ii)
A.

Term ofofficeShares held
(shares)(Note 3)784

70,492

Directors Hiroko Fuji, Kazuo Machigaki, Mikio Nakajo and Hidetoshi Nakatsuka are Outside Directors.
The term of office is until the conclusion of the General Meeting of Shareholders for the last fiscal year that ends
within a year after the appointment on May 30, 2023.
The term of office is until the conclusion of the General Meeting of Shareholders for the last fiscal year that ends
within two years after the appointment on May 27, 2022.
As an initiative to enhance corporate governance, the Company has introduced the executive officer system since
May 30, 2006 for the purpose of expediting decision making and strengthening the functions of the Board of
Directors.
Currently, the Company has 12 executive officers.
Senior Managing Executive Officer, COO: Nobuhiro Sewaki
Managing Executive Officer, CTO: Yasuo Sakane
Senior Executive Officer, CFO: Hirofumi Fujimoto
Senior Executive Officer in charge of Production and Safety Division Manager, Liquid Paraffin & Sulfonates:
Eijiro Oda
Executive Officer in charge of North America, President of MORESCO USA Inc.: Hidenori Amaki
Executive Officer in charge of Southeast/South Asia President of MORESCO (Thailand) Co., Ltd. and Presidentof PT.MORESCO MACRO ADHESIVE: Keiichi Matsutani
Executive Officer General Manager, Corporate R&D Department: Katsuhito Fukuda
Executive Officer in charge of China
President of WUXI MORESCO TRADING CO., LTD., President of MORESCO HANANO DIECASTING COATING (SHANGHAI）CO., LTD., President of MORESCO (ZHEJIANG) FUNCTION
MATERIAL CO., LTD., and President of MORESCO TRADING (ZHEJIANG) CO., LTD.
Liu Yingjin
Executive Officer Division, Manager, Functional Fluids and Representative Director and President of MORESCOTECHNO CO., LTD.: Jiro Hosomi
Executive Officer Division Manager, Hot Melt Adhesive: Kazuyoshi Fujita
Executive Officer Division Manager, Device Materials and General Manager, R&D Department, Device
Materials: Yasushi Hosooka
Executive Officer in charge of Circular Products General Manager, R&D Department, Functional Fluids: Naohiro
Kanematsu

Outside Officers
Relationship with Outside Directors
The Company has four Outside Directors (including three Outside Directors who are Audit and Supervisory Committee
members). All of these Outside Directors are independent officers as defined in the Securities Listing Regulations of theTokyo Stock Exchange.
Outside Director Hiroko Fuji served as an executive officer for 10 years at a major department store which is a groupcompany of a listed corporation and was deeply involved in management of the company through working as the store
manager of several flagship stores of the department store. She thus has abundant experience and knowledge with regard
to management. By making use of her experience and knowledge, she has provided us with guidance and advice formanagement of the Company and has contributed to career development of female employees and female managers of theCompany. She used to be an executive officer of Daimaru Matsuzakaya Department Stores Co., Ltd. in the past, but there―36―

is no relationship that should be disclosed between the Company and Daimaru Matsuzakaya Department Stores Co., Ltd.
Kazuo Machigaki, Outside Director who is an Audit and Supervisory Committee Member, has served for many years
as Representative Director, President and Representative Director, Chairman of Tokalo Co., Ltd., a top manufacturer inthe field of surface modification, and possesses abundant experience and extensive knowledge as a manager. By making
use of his experience and knowledge, he has properly performed auditing and supervision. He is from Tokalo Co., Ltd.,and the Company has a relationship with Tokalo Co., Ltd. of jointly conducting research and development.
Mikio Nakajo, Outside Director who is an Audit and Supervisory Committee Member, has professional knowledge
and extensive experience gained over many years as an attorney. By making use of his experience and knowledge, he has
properly performed auditing and supervision. He is the representative attorney of the Sawada, Nakajo and Mori Law
Office and also serves as an external auditor of Yamato Kogyo Co., Ltd. However, there is no relationship that should be
disclosed between the Company and the Law Office or Yamato Kogyo Co., Ltd.
Hidetoshi Nakatsuka, Outside Director who is an Audit and Supervisory Committee Member, has experience ofbeing involved in tax administration for many years. He is also familiar with corporate taxation as a tax accountant andthus has acquired professional knowledge about finance, accounting and taxation. By making use of his experience andknowledge, he has properly performed auditing and supervision. He is a representative of the Hidetoshi Nakatsuka Tax
Accountant Office and also serves as an external auditor of Tiger Corporation. However, there is no relationship thatshould be disclosed between the Company and the Office or Tiger Corporation.
As stated above, there are no personal, capital, trading or any other relationships between the Company and its
Outside Directors that may cause conflicts of interest with general shareholders
B.

Policy on independence of Outside Directors
In appointing Outside Directors, the Company has not established any particular criteria or policy concerning their
independence. However, when appointing an Outside Director, we determine for each candidate, based on his/her career
history and relationship with Company, whether sufficient independence can be ensured so that the candidate will be able
to perform his/her duties as an Outside Director in a standpoint independent from management of the Company.
iii) Mutual cooperation between supervision or audits by Outside Directors and internal audits, audits by Audit andSupervisory Committee Members and accounting audits, and relationship with internal control department
All of the Outside Directors of the Company supervise or audit business management from a standpoint
independent from the Company’s management. They receive reports on the status of development and operation ofinternal control systems, including compliance and risk management, and express opinions as appropriate.
The Audit and Supervisory Committee, of which a majority of members are Outside Directors, exchange opinions
and information with directors in charge of internal control whenever necessary, and work to improve effectiveness ofsupervision and auditing in cooperation with the internal control department, accounting auditors, etc. Through thesemeasures, the Company strives to ensure the soundness and appropriateness of its business management.

(3) Status of Auditsi) Status of audits by the Audit and Supervisory Committee
A. Organization and personnel of the Audit and Supervisory Committee
The Audit and Supervisory Committee consists of four members, including three independent Outside Directors, andone of them has been appointed as a full-time Audit and Supervisory Committee Member.
Director Hidetoshi Nakatsuka, who is an Audit and Supervisory Committee Member, has experience of being
involved in tax administration and is also familiar with corporate taxation as a tax accountant, thus having professional
knowledge about finance, accounting and taxation.
The Audit and Supervisory Committee conducts systematic audits and gives opinions based on reports it receives
from the Internal Audit Department and through other internal control systems. The Internal Audit Department andaccounting auditors keep close contact through reporting to each other on audit plans and the status of implementation,
results, etc. on a regular basis and exchanging opinions, with the aim of improving the effectiveness of audits.
B.

The Audit and Supervisory Committee meetings
The Audit and Supervisory Committee meetings are held in conjunction with the Board of Directors’ meetings and also
on a quarterly basis. During the fiscal year under review, 17 meetings were held, of which eight meetings were held
online due to COVID-19. The meeting time was about 1.5 hours for regular meetings and about two hours for quarterly
meetings.
The status of attendance of the Audit and Supervisory Committee Members is as follows.
Number of meetings Number of meetings
Name
held
attended (%)
Mikio Honda

13

13 (100%)

Kazuo Machigaki

17

17 (100%)

Mikio Nakajo

17

17 (100%)

Hidetoshi
17
17 (100%)
Nakatsuka(Note) For Director (full-time Audit and Supervisory Committee Member) Mikio Honda, the number of meetings attended is thenumber after he was appointed at the 64th Ordinary General Meeting of Shareholders held on May 27, 2022.

―37―

C.

Major matters examined by the Audit and Supervisory Committee
Major matters examined by the Audit and Supervisory Committee are as follows.
・ Revision of the regulations, etc. for Audit and Supervisory Committee
・ Audit policy and audit plan of the Audit and Supervisory Committee
・ Evaluation of the committee activities for the Audit and Supervisory Committee audit reports
・ Evaluation of accounting auditors
・ Formation of opinions on nomination and remuneration of directors who are not a member of the Audit andSupervisory Committee
・ Exchange of opinions with directors, including Representative Directors
・ Individual interviews with executive officers, etc.
・ Exchange of opinions with General Manager, Internal Audit Department
・ Exchange of opinions with the Compliance and Risk Management Committee secretariat
・ Status of compliance with the Corporate Governance CodeD.

Major activities of full-time Audit and Supervisory Committee Members
Major activities of the full-time Audit and Supervisory Committee Members are as follows.
・ Attendance at important meetings, such as the meetings of the Management Committee, Compliance and Risk
Management Committee, and Sustainability Committee
・ Viewing approval documents, contracts, and minutes of meetings
・ Regular meetings with the Internal Audit Department
・ Investigation on the status of operations and property of business sites of the Company and its subsidiaries in Japan・ Auditing of overseas subsidiaries using online meetings
・ Monitoring the status of deliberations of the Nomination and Compensation Committee

ii)A

Status of internal audits
Internal audits
The Company has an internal audit system in which the Internal Audit Department consisting of three members checks
and provides guidance for all departments, including subsidiaries, regarding compliance with laws and regulations, theeffectiveness of internal control, etc.
The Internal Audit Department conducts internal control audits, accounting audits, operational audits, and special
audits assigned by the Director and President to check whether the business activities in each department are appropriate
and effective in compliance with laws and regulations, the Articles of Incorporation, and other company regulations andstandards, thereby contributing to improving management efficiency and proper business management of the Company.
Besides reporting the details of audits to the Compliance and Risk Management Committee, the Internal Audit
Department exchanges and coordinates opinions with the Audit and Supervisory Committee and accounting auditors, withthe aim of improving efficiency and effectiveness of internal audits.

B.

Mutual cooperation between internal audits, audits by Audit and Supervisory Committee, and accounting audits, andrelationship between these audits and the internal control department
In order to make audits by the Audit and Supervisory Committee systematic and efficient, the Company has established asystem to ensure close cooperation between the Internal Audit Department and the Audit and Supervisory Committee. The
Internal Audit Department is positioned as the core of the internal control function that the executive sector centeredaround the Director and President is forming. At the same time, the Internal Audit Department regularly reports to the
Audit and Supervisory Committee on audit plans and results. Upon receiving the reports, the Audit and Supervisory
Committee, when it deems necessary, may request the Internal Audit Department to conduct an investigation or give
specific instructions regarding the execution of its duties. With these measures, the effectiveness of the systematic audits
by the Audit and Supervisory Committee is ensured.

iii) Status of accounting audits
A. Name of auditing firm
Grant Thornton Taiyo LLC
B.

Continuous audit period
4 yearsC.

Certified public accountants performing audit work
Iwao Arai
Kenji Furuta

D.

Composition of assistants involved in audit work
Assistants who are involved in the accounting audit work of the Company are seven certified public accountants and 15
others.

―38―

E.

Policy and reason for selecting accounting auditors
As a result of considering comprehensively the quality management system, independence, expertise, the system forauditing activities, and the level of audit compensation in accordance with the Criteria for Selecting Accounting Auditor
Candidates, the Company has determined that Grant Thornton Taiyo LLC has a system to ensure that the Company’s
accounting audit is conducted properly and adequately, and thus it appointed the firm as its accounting auditor.
If the accounting auditor is deemed to fall under any of the items of Article 340, Paragraph 1 of the Companies Act, theAudit and Supervisory Committee will dismiss the accounting auditor with the consent of all of the Audit and Supervisory
Committee Members. In such a case, an Audit and Supervisory Committee Member selected by the Committee will report
the dismissal of the accounting auditor and the reason therefor at the first General Meeting of Shareholders convened after
the dismissal.
In addition, the Audit and Supervisory Committee will determine whether it is appropriate to submit a proposal for
dismissal or refusal of reappointment of the accounting auditor for the General Meeting of Shareholders when:a) the accounting auditor has received disciplinary treatment or disposition by the supervisory authorities due to aserious violation of the Certified Pubic Accountants Act or other important law or regulation, and the Committee has
judged that there is no prospect of improvement thereto;b) as a result of comprehensive examination, the Committee has judged that the audit quality, quality management,
independence, efficiency, comprehensive abilities, etc., of the accounting auditor are insufficient;c) the continuous audit period of the accounting auditor exceeds 10 years in principle; ord) the Committee has judged that replacement of the accounting auditor will enable the Company to establish a more
appropriate audit system.

F.

Evaluation of the accounting auditor by the Audit and Supervisory Committee
The Company’s Audit and Supervisory Committee examined the evaluation items of the accounting auditor, including its
quality management system, details of the audit plan, audit operations (audit items, audit time, etc.), communication withmanagement and the Audit and Supervisory Committee, and response to the Group audits. As a result, no significant items
to be pointed out were found, and therefore the Committee has reappointed the accounting auditor.

iv) Details of audit fees, etc.
A. Remuneration to auditing certified public accountants, etc.
Previous consolidated fiscal year
Category

Consolidated fiscal year under review

Fees for audit
Fees for audit
Fees for non-audit
Fees for non-audit
certification (millions ofcertification (millions ofservices (millions of yen)services (millions of yen)
yen)
yen)

The Company (reporting
company)

27

―

28

―

Consolidated subsidiaries

―

―

―

―

Total

27

―

28

―

B.

Remuneration to the network of the auditing certified public accountants, etc. (excluding remuneration from A.)
Previous consolidated fiscal year

Category

Consolidated fiscal year under review

Fees for audit
Fees for audit
Fees for non-audit
Fees for non-audit
certification (millions ofcertification (millions ofservices (millions of yen)services (millions of yen)
yen)
yen)

The Company (reporting
company)

―

1

―

―

Consolidated subsidiaries

2

0

2

0

Total

2

1

2

0

Non-audit services at the Company are taxation advisory services by Grant Thornton Taiyo Tax Corporation.
Non-audit services at consolidated subsidiaries are taxation-related services by GRANT THORNTON INDIA LLP for
both the previous consolidated fiscal year and the consolidated fiscal year under review.
C.

Policy for determining audit fees
The fees are determined properly by the Representative Director with consent of the Audit and Supervisory Committee inaccordance with the Articles of Incorporation, taking into consideration the audit plan, audit content, audit schedule, etc.
of the accounting auditor.

―39―

D.

Reasons for the Audit and Supervisory Committee’s consent to fees, etc. of the accounting auditor
The Audit and Supervisory Committee, based on the draft of the audit policy for the relevant fiscal year submitted by theaccounting auditor and the hearing of executive employees on their recognition and intention, examined theanalysis/evaluation of audit results of the previous fiscal year, analysis on the difference between the audit plan andresults, the appropriateness of the audit time, staffing plan and the remuneration estimate, and the reasonable rate of audit
remuneration, etc. As a result, no problems were found with these matters, and the Committee judged the fees, etc. as
appropriate and thus provided consent as prescribed in Article 399, Paragraph 1 of the Companies Act.

(4) Remuneration, etc. for officersi) Policies for determining the amount and calculation method of remuneration, etc. of officers
A. Policy for determining remuneration of Directors (excluding Directors who are Audit and Supervisory Committee
Members)
The remuneration of the Company’s Directors is determined according to the Regulations for Remuneration of Directors,
etc., and the improvement (revision) of the regulations is determined by the Board of Directors after deliberation andreporting by the Nomination and Compensation Committee.
In determining remuneration of Directors, our policy is to consider the balance with business performance results, duties,
position, general level, and the employee salaries.
Remuneration of a director consists of base remuneration, which is fixed compensation calculated based on his/her
position and performance of the previous fiscal year, and restricted stock compensation, which is non-monetarycompensation to provide incentives for improving medium- to long-term corporate value. For Outside Directors, baseremuneration calculated based only on their positions are paid.
The amount of each type of remuneration is calculated as described below and paid at the time as indicated, though theratio of each type of remuneration has not been determined.
a) Base remunerationi) Amount calculated according to positionii) Amount calculated according to performance of the previous year
The total amount of i) and ii) is paid in a fixed amount every month from June each year to May the following year.
b) Non-monetary remuneration (restricted stock compensation)
The number of shares equivalent to the amount calculated according to the position is paid in June each year.
When a director concurrently serves as an executive officer, no remuneration is paid for the duties of the executive
officer.
At the 62nd Ordinary General Meeting of Shareholders held on May 26, 2020, it was decided that remuneration of
Directors (excluding directors who are Audit and Supervisory Committee Members) should be no more than 180 million
yen annually (including an annual amount of no more than 10 million yen for Outside Directors), and remuneration of
Directors who are Audit and Supervisory Committee Members should be no more than 36 million yen annually. As of
the conclusion of the said General Meeting of Shareholders, the number of Directors (excluding Directors who are Audit
and Supervisory Committee Members) was six (including one Outside Director), and the number of Directors who are
Audit and Supervisory Committee Members was four. As of the reporting date of the annual securities report, theCompany has five Directors (excluding Directors who are Audit and Supervisory Committee Members, including one
Outside Directors) and four Directors who are Audit and Supervisory Committee Members, who are eligible for the
remuneration. In addition, separately from the monetary remuneration, it was also decided at the same General Meetingof Shareholders that the amount of restricted stock compensation for Directors (excluding Directors who are Audit andSupervisory Committee Members, and Outside Directors) should be no more than 50 million yen annually and the total
number of common shares of the Company to be issued or disposed of should be no more than 40,000 shares annually.
As of the conclusion of the said General Meeting of Shareholders, the number of Directors (excluding Directors who are
Audit and Supervisory Committee Members, and Outside Directors) was five. As of the reporting date of the annual
securities report, the Company has four Directors (excluding Directors who are Audit and Supervisory Committee
Members, and Outside Directors), who are eligible for the remuneration.
B.

Procedure for determining remuneration of Directors (excluding Directors who are Audit and Supervisory Committee
Members)
Remuneration of Directors is determined determined by the Board of Directors, within the limit for the amount of
remuneration decided at the General Meeting of Shareholders, after deliberation and reporting by the Nomination andCompensation Committee.
The Nomination and Compensation Committee, upon consultation with the Board of Directors, discusses the baseremuneration and non-monetary remuneration, in comparison with executive compensation of Japanese listed companiesof the same scale as the Company in terms of sales and the number of employees, using survey data of externalorganizations, in consideration of the Company’s performance results, etc., and reports the total remuneration amount andthe remuneration amount of each individual to the Board of Directors. Remuneration of Directors who are Audit andSupervisory Committee Members is decided through deliberation by the Audit and Supervisory Committee.

C.

Activities of the Board of Directors and the Nomination and Compensation Committee
During the fiscal year under review, the Nomination and Compensation Committee met four times, on April 12 and May
27, 2022, and January 13 and February 14, 2023, to discuss mainly the matters related to the election of the director
candidates, based on the status of skills of the Board of Directors.

―40―

ii)

Total remuneration by officer category, remuneration amount by type, and number of eligible officers
Total amount of remuneration, etc. by type (millions ofyen)
Officer category

Amount of
remuneration etc.
(Millions of yen)

Base remuneration
Restricted stockcompensation

Number of eligible
officers

Position-based
remuneration

Performancelinked
remuneration

162

118

32

12

4

13

13

－

－

2

Outside Directors

24

24

－

－

5

Total

199

155

32

12

11

Director(excluding Directors on Audit
and Supervisory Committee,
and Outside Directors )Director(Audit and Supervisory
Committee Member)(excluding Outside
Directors) )(Notes)1.

The number of eligible officers includes an Outside Director and a Director who was an Audit and Supervisory
Committee Member, who resigned upon conclusion of the 64th Ordinary General Meeting of Shareholders held on
May 27, 2022.
Regarding remuneration, etc. of each individual for the fiscal year under review, the Board of Directors has
confirmed that the method of determining the content of remuneration, etc. and the content of the determined
remuneration, etc. are consistent with the above-mentioned policy and that reports from the Nomination andCompensation Committee are respected, and thus it judged that the remuneration etc. complies with the said policy.
The Audit and Supervisory Committee of the Company has expressed their opinion that remuneration etc., of
Directors (excluding Directors who are Audit and Supervisory Committee Members) has been determined by the
Board of Directors after deliberation and reporting by the Nomination and Compensation Committee and that theamount of individual remuneration and the process for determining the amount are appropriate.

2.

3.

(5) Information on shareholdingsi) Standards and approach toward classification of investment shares
The Company classifies its equity securities into investment shares held for pure investment, which are held purely forthe purpose of receiving profits from stock price fluctuations or stock dividends, and investment shares held for
purposes other than pure investment, which are deemed strategically necessary. In principle, our policy is not to holdinvestment shares for pure investmentii)

investment shares held for purposes other than pure investment
A. Shareholding policy and method of verifying rationale of holding, and details of verification by Board of Directors,
etc. concerning holding of individual issues
The Company’s policy is to examine whether to hold or sell the investment shares each year at the Board of
Directors’ meeting, based on awareness of the capital cost of the Company, as well as dividends, capital gains, andprofits from transactions, also in consideration of the rationale of the purposes of holding, such as business
partnerships, maintaining or enhancing transactions, and stabilizing the shares.
In light of this policy, the Company regularly determines the necessity of holding at the Board of Directors’
meetings, based on the purpose of holding, status of transactions, benefits associated with the holding, etc.
B.

Number of issues and balance sheet amount
Number ofissuesTotal balance sheet amount(millions of yen)

Unlisted shares

5265

Shares other than unlisted
shares

3

161

―41―

(Issues whose number of shares increased during the fiscal year under review)
Number of
Total acquisition cost for
issuesincreased shares (millions of Reason for increase in number of sharesyen)
To maintain and enhance business
Unlisted shares
1
100
relationships
Shares other than unlisted―― ―shares(Issues whose number of shares decreased during the fiscal year under review)Not applicable.
C.

Information on number of shares and balance sheet amount of specified investment shares

Specified investment shares

Issue

Fiscal year underreview

Previous fiscal year

Number of shares

Number of shares

Balance sheet amount Balance sheet amount(Millions of yen)
(Millions of yen)

Purpose of holding, quantitative effects ofholding, and reason for the increase in thenumber of shares

Holding oftheCompany’s
sharesThe Company’s Chiba Plant has business
relationships with several consolidated
subsidiaries of this company for productNippon Soda Co.,
sales, purchase of subsidiary materials,
Yes
Ltd.
93
68 disposal of waste sulfuric acid, etc. The
shareholding is for the purpose of maintaining
and enhancing these business relationships.
23,60023,600 The shareholding is for the purpose ofmaintaining and enhancing the business
Mizuho Financial
relationships, mainly for fund procurement
Yes
Group, Inc.
50
36 both inside and outside Japan, with thiscompany as a major partner financial
institution.
18,40018,400 The shareholding is for the purpose ofmaintaining and enhancing the business
Mitsubishi UFJ
relationships, mainly for fund procurement
Yes
Financial Group, Inc.
18
13 both inside and outside Japan, with thiscompany as a major partner financial
institution.
(Note) Quantitative effects of holding are not stated as they are difficult to describe. The rationale of holding is verified by the Boardof Directors every year according to the method described in B. above.
20,152

20,152iii) Investment shares held for pure investment
Not applicable.

―42―

V. Financial Information
1.

Basis of preparation of consolidated and non-consolidated financial statements(1) The consolidated financial statements of the Company are prepared in accordance with the Regulation on Terminology,
Forms, and Preparation Methods of Consolidated Financial Statements (Ministry of Finance Order No. 28 of 1976).
(2) The non-consolidated financial statements of the Company are prepared in accordance with the Regulation on Terminology,
Forms, and Preparation Methods of Financial Statements (Ministry of Finance Order No. 59 of 1963, hereinafter referred toas the “Financial Statement Regulations”).
As the Company qualifies as a company submitting non-consolidated financial statements prepared in accordance withspecial provisions, the Company prepares its non-consolidated financial statements pursuant to Article 127 of the Financial
Statements Regulations.

2.

Audit certification
Pursuant to the provisions of Article 193-2, Paragraph 1, of the Financial Instruments and Exchange Act, the Company’s
consolidated and non-consolidated financial statements for the fiscal year (March 1, 2022 to February 28, 2023) were audited by
Grant Thornton Taiyo LLC.

3.

Special efforts to ensure the appropriateness of consolidated financial statements, etc.
The Company makes special efforts to ensure the appropriateness of its consolidated financial statements, etc. Specifically, inorder to accurately ascertain the content of the accounting standards and appropriately address changes in these accounting
standards, the Company maintains membership in the Financial Accounting Standards Foundation and regularly participates inseminars held by the Foundation.

―43―

1.

Consolidated Financial Statements, etc.
(1) Consolidated Financial Statementsi) Consolidated balance sheet
Previous consolidated fiscal year
(as of February 28, 2022)(Millions of yen)
Consolidated fiscal year underreview(February 28, 2023)

AssetsCurrent assets
Cash and deposits
Notes and accounts receivable - trade

4,001
6,844

Notes receivable - trade
Accounts receivable - trade
Merchandise and finished goods
Raw materials and supplies

－
－
2,935
2,391

Other
Allowance for doubtful accounts

461
(25)

675
(22)

16,607

18,810*3 6,867

Total current assets

4,256
－
1,235
6,360
3,276
3,030

Non-current assets
Property, plant and equipment
Buildings and structures
Accumulated depreciation(3,327)

7,402(3,516)

Buildings and structures, net*3 3,540

3,886

Machinery, equipment and vehicles
Accumulated depreciation*3 10,513(8,478)

10,793(8,978)*3 2,035

1,815*3 1,954

1,963

189
(134)

230
(148)

55

82

Machinery, equipment and vehicles, net
Land
Leased assets
Accumulated depreciation
Leased assets, net
Construction in progress
Other
Accumulated depreciation
Other, net
Total property, plant and equipment

294

491

*3, *4 3,004*4 3,143(2,579)(2,770)*3, *4 425*4 373

8,304

8,610

Intangible assets
Goodwill

219

92

Leased assets
Other

1
412

45
452

Total intangible assets

633

589

Investments and other assets
Investment securities*1 367*1 520*2 1,915*2 2,078

29

75

976
179

1,160
168

Investments in capital
Deferred tax assets
Net defined benefit asset
Other
Allowance for doubtful accounts

(0)

(0)

Total investments and other assets

3,465

4,002

12,401

13,202－

6

Total non-current assets
Deferred assets
Business commencement expenses
Total deferred assets
Total assets

―44―

－

6

29,00832,017

Previous consolidated fiscal year
(as of February 28, 2022)(Millions of yen)
Consolidated fiscal year underreview(February 28, 2023)

Liabilities
Current liabilities
Notes and accounts payable - trade
Contract liability

4,308

5,144
94

Short-term borrowings
Income taxes payable

－
560
427

Provision for bonuses
Other

529
1,437

464
1,334

Total current liabilities

7,260

9,599

Long-term borrowings
Net defined benefit liability

350
531

472
498

Other

316

208

2,381
183

Non-current liabilities

Total non-current liabilities

1,197

1,179

8,457

10,778

Capital stock
Capital surplus

2,118
1,976

2,118
1,976

Retained earnings
Treasury shares

13,517(384)

13,760(567)

Total shareholders’ equity

17,227

17,287

38

74

505
191

879
293

Total liabilities
Net assets
Shareholders’ equity

Accumulated other comprehensive income
Valuation difference on available-for-salesecurities
Foreign currency translation adjustment
Remeasurements of defined benefit plans

735

1,246

Non-controlling interests

Total accumulated other comprehensive income

2,589

2,706

Total net assets

20,551

21,24029,00832,017

Total liabilities and net assets

―45―

ii)

Consolidated statement of income and consolidated statement of comprehensive income
Consolidated statement of income

Net sales
Cost of sales*2 18,575(Millions of yen)
Consolidated fiscal year underreview(From March 1, 2022
to February 28, 2023)*1 30,333*2 22,204

Gross profit

8,725

8,129

*3, *4 7,291*3, *4 7,606

1,434

523

Interest income
Dividend income

23
14

21
19

Foreign exchange gains
Share of profit of entities accounted for using equity
method
Other

247

295

239

148

79

76

Total non-operating income

602

559

12
5

13
5

Other

9

18

Total non-operating expenses

26

36

Ordinary profit

2,011

1,046

Extraordinary income
Gain on sale of non-current assets*5 833－

Previous consolidated fiscal year
(From March 1, 2021
to February 28, 2022)
27,300

Selling, general and administrative expenses
Operating profit
Non-operating income

Non-operating expenses
Interest expenses
Loss on retirement of non-current assets

Total extraordinary income
Profit before income taxes

833

－

2,844

1,046

Income taxes - current

653

587

Income taxes - deferred

178

(267)

831

320

2,013

726

Total income taxes
ProfitProfit attributable to non-controlling interests
Profit attributable to owners of parent

―46―

205

112

1,808

615

Consolidated statement of comprehensive income

2,013(Millions of yen)
Consolidated fiscal year underreview(From March 1, 2022
to February 28, 2023)
726

Valuation difference on available-for-sale securities
Foreign currency translation adjustment

17
731

36
470

Remeasurements of defined benefit plans, net of tax
Share of other comprehensive income of entities
accounted for using equity method
Total other comprehensive income

41

103

47

17

*1 836*1 627

2,848

1,353

2,480
368

1,126
227

Previous consolidated fiscal year
(From March 1, 2021
to February 28, 2022)
ProfitOther comprehensive income

Comprehensive income
Comprehensive income attributable to
Owners of parent
Non-controlling interests―47―iii) Consolidated statement of changes in equity
Previous consolidated fiscal year (from March 1, 2021 to February 28, 2022)(Millions of yen)
Shareholders’ equity
Capital stock
Balance at beginning of
period2,118

Capital surplus

Retained earnings

Treasury shares

Total shareholders’equity1,976

12,132(390)

15,836

Changes during period
Dividends of surplus
Profit attributable toowners of parent
Disposal of treasury
sharesNet changes in items
other than shareholders’equity

(422)

(422)

1,808

1,808

(0)

5

5

Total changes during
period

－

(0)

1,386

5

1,391

Balance at end of period

2,118

1,976

13,517(384)

17,227

Total accumulated
othercomprehensive
incomeNon-controllinginterests

Total net assets

63

2,264

18,163

Accumulated other comprehensive income
Valuation difference Foreign currency Remeasurements ofon available-for-saletranslation
defined benefit
securities
adjustment
plans
Balance at beginning of
period

27

(117)

152

Changes during period
Dividends of surplus
Profit attributable toowners of parent
Disposal of treasury
sharesNet changes in items
other than shareholders’equityTotal changes during
periodBalance at end of period

(422)
1,808
5
11

622

39

672

326

998

11

622

39

672

326

2,389

38

505

191

735

2,589

20,551―48―

Consolidated fiscal year under review (from March 1, 2022 to February 28, 2023)(Millions of yen)
Shareholders’ equity
Capital stock
Balance at beginning of
period2,118

Capital surplus

Retained earnings

Treasury shares

Total shareholders’equity1,976

13,517(384)

17,227

Changes during period
Dividends of surplus
Profit attributable toowners of parent
Purchase of treasury
shares
Disposal of treasury
sharesNet changes in items
other than shareholders’equityTotal changes during
periodBalance at end of period

(372)

(372)

615

615

1

(194)

(194)

12

12

－

1

242

(183)

60

2,118

1,976

13,760(567)

17,287

Total accumulated
othercomprehensive
incomeNon-controllinginterests

Total net assets

735

2,589

20,551

Accumulated other comprehensive income
Valuation difference Foreign currency Remeasurements ofon available-for-saletranslation
defined benefit
securities
adjustment
plans
Balance at beginning of
period

38

505

191

Changes during period
Dividends of surplus(372)

Profit attributable toowners of parent

615

Purchase of treasury
shares
Disposal of treasury
sharesNet changes in items
other than shareholders’equityTotal changes during
periodBalance at end of period

(194)
12
36

373

102

511

117

628

36

373

102

511

117

688

74

879

293

1,246

2,706

21,240―49―iv) Consolidated statement of cash flows(Millions of yen)
Consolidated fiscal year underPrevious consolidated fiscal year
review(From March 1, 2021 to February(From March 1, 2022 to February
28, 2022)
28, 2023)
Cash flows from operating activities
Profit before income taxes

2,844

1,046

Depreciation
Share of loss (profit) of entities accounted for using
equity method
Loss (gain) on sale of property, plant and equipment
Decrease (increase) in net defined benefit asset

1,210

1,236

(239)

(148)

(842)
(103)

(10)
(225)

Increase (decrease) in provision for bonuses
Increase (decrease) in allowance for doubtful accounts

85
(3)

(66)
(4)

Interest and dividend income
Interest expenses

(37)
12

(40)
13

Decrease (increase) in trade receivables
Decrease (increase) in inventories

75
(900)

(570)
(798)

Increase (decrease) in trade payables
Other

191
144

727
81

Subtotal

2,437

1,242

Interest and dividends received
Interest paid

241
(12)

123
(13)

Income taxes paid

(333)

(837)

Cash flows from operating activities

2,333

515

Net decrease (increase) in time deposits
Purchase of property, plant and equipment

101
(934)

282
(1,283)

Proceeds from sale of property, plant and equipment
Purchase of intangible assets

1,511
(31)

10
(60)

Purchase of investment securities
Other

(3)
(40)

(104)
(16)

Cash flows from investing activities

603(1,172)(1,955)

1,884
500

Cash flows from investing activities

Cash flows from financing activities
Net increase (decrease) in short-term borrowings
Proceeds from long-term loans payable

－
(469)

Repayments of long-term borrowings
Purchase of treasury shares

(443)
(194)

Dividends paid
Dividends paid to non-controlling interests

－
(424)
(59)

Other

(30)

(36)

(2,937)

1,227

(20)

(38)

(21)

532

Cash flows from financing activities
Effect of exchange rate change on cash and cash
equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

―50―

(372)
(111)

3,675

3,654

*1 3,654*1 4,186

1.

2.

3.

Notes
(Important matters that are the basis for preparation of consolidated financial statements)
Scope of consolidation
Number of consolidated subsidiaries: 14
Names of consolidated subsidiaries
MATSUKEN CO., LTD.
MORESCO TECHNO CO., LTD
Ethylene Chemical Co., Ltd.
MORESCO(Thailand)Co.,Ltd.
MORESCO Holding(Thailand)Co.,Ltd.
MORESCO USA Inc.
WUXI MORESCO TRADING CO., LTD.
MORESCO HANANO DIE-CASTING COATING (SHANGHAI）CO., LTD.
MORESCO (ZHEJIANG) FUNCTION MATERIAL CO., LTD.
MORESCO TRADING (ZHEJIANG) CO., LTD.
TIANJIN MORESCO TECHNOLOGY CO., LTD.
PT.MORESCO INDONESIA
PT.MORESCO MACRO ADHESIVEMORESCO HM&LUB INDIA PRIVATE LIMITEDOf the above subsidiaries, MORESCO (ZHEJIANG) FUNCTION MATERIAL CO., LTD. and MORESCO TRADING(ZHEJIANG) CO., LTD. were newly established during the consolidated fiscal year under review and are therefore included in
the scope of consolidation.
Application of equity method(1) Number of affiliates accounted for using equity method: 2Names of affiliates
Wuxi More Tex Technology Co., Ltd.
Zhangjiagang TEEC Automotive Chemicals Co., Ltd.
(2) Wuxi More Tex Technology Co., Ltd. and Zhangjiagang TEEC Automotive Chemicals Co., Ltd. settled their accounts on
December 31, but the consolidated financial statements are prepared using the non-consolidated financial statements as ofthat date.
Fiscal years, etc. of consolidated subsidiaries
Among the consolidated subsidiaries,
MORESCO(Thailand)Co.,Ltd.
MORESCO Holding(Thailand)Co.,Ltd.
MORESCO USA Inc.
WUXI MORESCO TRADING CO., LTD.
MORESCO HANANO DIE-CASTING COATING (SHANGHAI）CO., LTD.
MORESCO (ZHEJIANG) FUNCTION MATERIAL CO., LTD.
MORESCO TRADING (ZHEJIANG) CO., LTD.
TIANJIN MORESCO TECHNOLOGY CO., LTD.
PT.MORESCO INDONESIA
PT.MORESCO MACRO ADHESIVEMORESCO HM&LUB INDIA PRIVATE LIMITED
settle their accounts on December 31,
In preparing the consolidated financial statements, non-consolidated financial statements as of their settlement date are used.
However, for important transactions that took place during the period from the settlement date to the consolidated settlement date,adjustments necessary for consolidated accounting have been made.

―51―

4.

Information on accounting policies(1) Standards and methods for evaluating important assetsi) Securities
Available-for-sale securities
Securities other than shares without a market price
Fair value method (unrealized gain and loss, net of tax are recorded in net assets, and the moving average method isused to calculate the cost of securities sold)Shares without a market priceMoving average cost methodii) Derivatives
Fair value methodiii) Inventories
Mainly gross average cost method(The balance sheet values are calculated by writing down the book values in response to decreased profitability)(2) Depreciation methods for important depreciable assetsi) Property, plant and equipment (excluding leased assets)
The Company and its consolidated subsidiaries in Japan adopt mainly the declining-balance method and overseas
consolidated subsidiaries adopt the straight-line method.
However, the Company and its consolidated subsidiaries in Japan adopt the straight-line method for buildings(excluding facilities attached to buildings) acquired on or after April 1, 1998, and facilities attached to buildings andstructures acquired on or after April 1, 2016.
Major useful lives are as follows.
Buildings and structures: 3 to 60 years
Machinery, equipment and vehicles: 4 to 15 yearsii) Intangible assets (excluding leased assets)
The straight-line method is adopted.
Useful life of software used in-house is based on the usable period inside the company (5 years).
iii) Leased assets
Leased assets relating to finance lease without transfer of ownership
The straight-line method is used with a useful life of the lease period and with a residual value of zero.
(3) Accounting standards for important reserves and allowancesi) Allowance for doubtful accounts
In order to prepare for possible losses on uncollectible receivables held, estimated uncollectible amounts are posted: forgeneral receivables, according to the historical percentage of uncollectibles, and for doubtful receivables, considering
the probability of collection.
ii) Provision for bonuses
In order to prepare for payment of bonuses to employees, a provision is made based on the estimated bonus payments,
which are attributable to the consolidated fiscal year under review.
(4) Accounting standards for important income and expenses
The main business of the MORESCO Group is manufacture and sale of chemical products (specialty lubricants, synthetic
lubricants, liquid paraffin & sulfonates, hot melt adhesives, and energy device materials). With regard to sale of such goods
and products, the Group determines that control of goods is transferred to customers at the time of delivery. As the period
between shipment and delivery is a normal period of time, the Group applies alternative treatment based on importance, etc.,
and recognizes revenue at the time of shipment of goods and products for inside Japan. For overseas, based on the terms oftrade stipulated by Incoterms, etc., the Group determines that control of goods and products is transferred to customers andits performance obligations are satisfied when risks are transferred to customers. Therefore, the Group recognizes revenue atthe time of shipment of goods and products in principle.
(5) Accounting treatment for retirement benefitsi) Method to attribute the estimated retirement benefits to the periods
To calculate retirement benefit obligations, the benefit formula method is adopted as a method to attribute the estimatedretirement benefits to the periods up to the end of the consolidated fiscal year under review.
ii) Method of amortization of actuarial gains and losses
The actuarial differences are recognized in the following consolidated fiscal year by the straight-line method over acertain period (mainly 14 years) that are not more than the average remaining service period of employees at the time of
the accrual of a difference.
(6) Standards for translation of important foreign currency-denominated assets or liabilities into Japanese yen
Foreign currency receivables/payables are translated into Japanese yen using the spot foreign exchange rate on the
consolidated closing date, and translation differences are treated as income or loss. The assets and liabilities of subsidiaries
overseas are translated into Japanese yen using the spot foreign exchange rate on the closing date; income and expenses aretranslated into yen using an average market rate during the period, and translation differences are included in “Foreign
currency translation adjustment” and “Noncontrolling interests” of the “Net assets”.
(7) Important hedge accounting methodsi) Hedge accounting method
Exceptional accounting is adopted for interest-rate swaps that meet the requirements for exceptional accounting.

―52―

ii)

Means of hedging and hedged items
Means of hedging: interest-rate swaps
Hedged items: borrowingsiii) Hedging policy
Hedging is conducted within the range of the target obligations for the purpose of reducing interest rate risks andimproving the financial account balance.
iv) Method for evaluating the effectiveness of hedges
The evaluation of hedge effectiveness is omitted for interest-rate swaps for which exceptional accounting is used.
(8) Method and period of amortization of goodwill
Goodwill is regularly amortized using the straight-line method over an effective period up to 20 years. However, minor
goodwill is entirely amortized all at once.
(9) Scope of cash and cash equivalents in consolidated statement of cash flows
Cash and cash equivalents consist of cash on hand, cash in banks which can be withdrawn at any time and short-term
investments with a maturity of three months or less when purchased which can easily be converted to cash and are subject tolittle risk of change in value.
(10) Other important matters that are the basis for preparation of consolidated financial statements
Treatment of deferred assets
Business commencement expenses
Amortized using the straight-line method over an effective period up to five years(11) Accounting principles and procedures that were adopted when relevant accounting standards, etc. were unclear
Restricted stock compensation system
Remuneration, etc. paid to directors of the Company based on the Company’s restricted stock compensation system is treatedas expenses over the applicable service period.

―53―

(Important accounting estimates)
1. Valuation of inventories(1) Amount recorded in the consolidated financial statements for the consolidated fiscal year under review(Millions of yen)Previous consolidated
Consolidated fiscal year
fiscal year
under review
Merchandise and finished goods
2,935
3,276
Raw materials and supplies

2,391

Cost of sales(49)
For loss on valuation of inventories (reversal), net amount after reversal is stated.

3,030
38

(2) Information on the details of accounting estimatesi) Calculation method
The balance sheet values of merchandise and finished goods, and raw materials and supplies, are calculated by writing
down the book values in response to decreased profitability. If the net sales value or replacement cost of merchandiseand finished goods, or raw materials and supplies, is lower than their book value, said net sales value or replacement
cost is stated as the carrying value of the consolidated balance sheet. For inventories that fall out of the normal
operating cycle, those that have passed a certain period of time or have exceeded a certain turnover period as of the endof the fiscal year are judged as slow-moving stock, excluding those judged to have the potential to be sold as a result ofindividual examination in light of the future sales prospect based on past sales performance, etc., and the fact of
decreased profitability is reflected by using a regular write-down method of book values.
ii) Major assumptions
Calculation of the net sales value or replacement cost of inventories is based on the actual result of sales or purchases
before the final date of the consolidated fiscal year. The net sales value or replacement cost of inventories that have notbeen sold or purchased for a certain period of time is estimated considering past sales or purchase records. The sales
potential of slow-moving stock is examined individually in light of the future sales prospect based on past sales
performance, etc.
iii) Impact on the consolidated financial statements for the following consolidated fiscal year
If the net sales value or replacement cost significantly declines due to changes in the market environment, it may have aserious impact on income of the following consolidated fiscal year.
2.

Impairment losses on non-current assets(1) Amount recorded in the consolidated financial statements for the consolidated fiscal year under review(Millions of yen)Previous consolidated
Consolidated fiscal year
fiscal year
under review
Property, plant and equipment
8,304
8,610
Intangible assets

633

589

(2) Information on the details of accounting estimatesi) Calculation method
The Company classified assets into the smallest cash-generating groups. For the asset groups that may be impaired, if
the total amount of cash before discount that would be received from such asset groups is lower than their book value,
the book value is reduced to the recoverable amount, and the reduced amount is recorded as an impairment loss.
ii) Major assumptions
The future cash to be generated from continuous use of asset groups are estimated based on the business plan approvedby the Board of Directors. Major assumption in these estimates is sales forecast, which is made based on the market
trends, recent business performance, etc.

―54―iii) Impact on the consolidated financial statements for the following consolidated fiscal year
If the estimated future cash flows significantly decline due to deterioration of the business environment, etc., it may have aserious impact on income of the following consolidated fiscal year.
(Changes in accounting policies)(Application of the Accounting Standard for Revenue Recognition, etc.)
The Company has applied the “Accounting Standard for Revenue Recognition” (Accounting Standards Board of Japan (ASBJ)
Statement No. 29, March 31, 2020; hereinafter, the “Revenue Recognition Accounting Standard”), etc., effective from the
beginning of the consolidated fiscal year under review, and recognizes revenue in the amount expected to be received in exchange
for promised goods or services at the time when control of these goods or services is transferred to customers.
The application of the Revenue Recognition Accounting Standard, etc. is subject to the transitional treatment provided for in
the proviso to Paragraph 84 of the Revenue Recognition Accounting Standard. The cumulative effect of the retroactive applicationof the new accounting policy, assuming that it has been applied to periods prior to the beginning of the consolidated fiscal year
under review, is added to or subtracted from retained earnings at the beginning of the consolidated fiscal year under review, andthe new accounting policy is applied from the beginning balance. However, by applying the method stipulated in Paragraph 86 of
the Revenue Recognition Accounting Standard, the new accounting policy has been retroactively applied to contracts in which
nearly all amounts of revenue were recognized in accordance with the previous treatment before the beginning of the consolidated
fiscal year under review. This has no impact on the beginning balance.
Details of changes due to the application of this accounting standard are as follows.
・ Sales of products to customers
The Company has changed its method to recognize revenue when risks are transferred to customers in accordance with theterms of trade stipulated by Incoterms, etc., for contracts of export sales to which the shipment standard was conventionallyapplied but risks are not transferred at the time of shipment.
・ Paid receipt transactions
For paid receipt transactions, in which the Company purchases raw materials, etc. from its customers and sells them back tothe same customers after processing them, the Company has changed its method to recognize revenue by the net amount of
the consideration less the purchase prices of the raw materials, from the conventional method of recognizing revenue by the
total amount of consideration including the purchase prices of the raw materials, etc. The ending inventory of raw
materials, which was included in inventories, is now included in “Other” under current assets.
・ Paid supply transactions
For paid supply transactions, we conventionally recognized extinguishment with regard to the goods supplied withpayment. But when we are obliged to buy back the supplied goods, we now continue to recognize such supplied goods andalso recognize liabilities related to paid supply transactions for the ending inventory of the supplied goods remaining atrecipients thereof.
・ Agent transactions
For transactions with agents, the amount of consideration that customers pay less the commission fees paid to agents wasconventionally recognized as revenue. But the Company has changed the method for some agents to recognize the total
amount of consideration that customers pay as revenue and recognize fees to agents as expenses.
“Notes and accounts receivable - trade,” which had been presented under “Current assets” in the consolidated balance sheetof the previous fiscal year, has been included in “Notes receivable - trade” and “Accounts receivable – trade” from theconsolidated fiscal year under review. “Other,” which had been presented under “Current liabilities,” has been included in“Contract liabilities” and “Other” from the consolidated fiscal year under review. In accordance with the transitional treatment
provided for in Paragraph 89-2 of the Revenue Recognition Accounting Standard, the Company has not reclassified financial
statements for the previous fiscal year using the new presentation method.
As a result, the impact on the consolidated financial statements of the consolidated fiscal year under review is minor. In
accordance with the transitional treatment provided for in Paragraph 89-3 of the Revenue Recognition Accounting Standard, notes
to “Revenue recognition” relating to the previous fiscal year are not presented.
(Application of the Accounting Standard for Fair Value Measurement, etc.)
The Company has applied the “Accounting Standard for Fair Value Measurement” (ASBJ Statement No. 30, July 4, 2019;
hereinafter, the “Fair Value Measurement Accounting Standard”), etc., effective from the beginning of the consolidated fiscal year
under review. And, in accordance with the transitional treatment provided for in Paragraph 19 of the Fair Value Measurement
Accounting Standard and Paragraph 44-2 of the “Accounting Standard for Financial Instruments” (ASBJ Statement No. 10, July4, 2019), the Company will apply the new accounting policy prescribed by the Fair Value Measurement Accounting Standard, etc.
into the future. However, this application has no impact on the consolidated financial statements.
In addition, the Company includes notes on matters relating to breakdown, etc. of fair values of financial instruments bylevel in the notes to “Financial instruments.” However, in accordance with the transitional treatment prescribed in Paragraph 7-4of the “Implementation Guidance on Disclosures about Fair Value of Financial Instruments” (ASBJ Guidance No. 19, July 4,2019), notes relating to the previous fiscal year are not presented.
(Accounting standards not yet applied)
Not applicable.

―55―

(Changes in presentation)(Consolidated balance sheet)“Lease obligations” under “Current liabilities” and “Lease obligations” under “Non-current liabilities,” which were presented
independently in the previous fiscal year, have been included in “Other” under “Current liabilities” and “Other” under “Noncurrent liabilities,” respectively, from the consolidated fiscal year under review due to the decreased materiality. To reflect thischange in the presentation method, consolidated financial statements for the previous fiscal year have been reclassified. As aresult, 36 million yen presented in “Lease obligations” under “Current liabilities” and 22 million yen presented in “Leaseobligations” under “Non-current liabilities” in the consolidated balance sheet for the previous fiscal year are included in “Other”
under “Current liabilities” and “Other” under “Non-current liabilities,” respectively.
(Supplementary information)(Accounting estimates relating to the impact of the spread of COVID-19)
The MORESCO Group makes accounting estimates of the recoverability of deferred tax assets, impairment accounting for noncurrent assets, etc., based on the information available at the time of preparation of consolidated financial statements. Regarding theimpact of COVID-19, the Group has made accounting estimates based on the assumption that although it will last for a certain
period of time, the situation will gradually recover. However, there are many uncertainties regarding the impact of COVID-19. If thetiming of settlement or the impact on the economic environment changes, it may affect the Group’s financial position and operating
results.

―56―

(Consolidated balance sheet)*1 Investments in unconsolidated subsidiaries are as follows.
Previous consolidated fiscal year
(as of February 28, 2022)
Investment securities (stocks)*2

Consolidated fiscal year under review(February 28, 2023)

3million yen

3million yen

Investments in affiliates are as follows.
Previous consolidated fiscal year
(as of February 28, 2022)
Investments in capital*3

Consolidated fiscal year under review(February 28, 2023)

1,914million yen

2,077million yen

Pledged assets and secured liabilities
Pledged assets are as follows.

Buildings and structures
Machinery, equipment and vehicles
Land

Previous consolidated fiscal year
(as of February 28, 2022)
millionmillion
23
( 23
yen
yen)
1
( 1
)
( 470

)

－

(

－

)

(

0

)

－

(

－

)

Total
494
( 494
Figures in parentheses above indicate factory foundation mortgages.

)

－

(

－

)

Property, plant and equipment; Other

470

Consolidated fiscal year under review(February 28, 2023)
millionmillion
( －
－
yen
yen)
( －
)
－

0

There are no liabilities corresponding to pledged assets.
*4

Reduction entry
Total reduction entries due to acquisition of government subsidies, etc. for property, plant and equipment are as follows.
Previous consolidated fiscal year
(as of February 28, 2022)
Property, plant and equipment; Other

11million yen―57―

Consolidated fiscal year under review(February 28, 2023)
11million yen

(Consolidated statement of income)*1 Revenue arising from contracts with customers
With respect to net sales, the Company does not disaggregate revenue arising from contracts with customers and other revenues.
The amount of revenue arising from contracts with customers is presented in “Notes to consolidated Financial Statements(Revenue recognition), 1. Information regarding disaggregated revenue arising from contracts with customers.”*2

The ending inventory is the amount after write-down in response to decreased profitability, and loss on valuation of inventories
below is included in cost of sales.
Previous consolidated fiscal year
(From March 1, 2021 to February 28, 2022)

Consolidated fiscal year under review(From March 1, 2022 to February 28, 2023)(49)million yen*3

38million yen

Major components of selling, general and administrative expenses and their amounts are as follows.
Previous consolidated fiscal year
(From March 1, 2021 to February 28,
2022)
Salaries*42,062million yen

2,097million yen

Provision for bonuses

387

346

Retirement benefit expenses
Provision of allowance for doubtful
accounts
Depreciation

146

131

(1)

1

637

585

Freightage expenses

868

949

Research and development expenses included in general and administrative expenses
Previous consolidated fiscal year
(From March 1, 2021 to February 28, 2022)

Consolidated fiscal year under review(From March 1, 2022 to February 28, 2023)

1,359million yen*5Consolidated fiscal year under review(From March 1, 2022 to February 28,
2023)

1,246million yen

Details of gain on sales of non-current assets are as follows.
Previous consolidated fiscal year
(From March 1, 2021 to February 28,
2022)
Land, buildings and structures, etc.

833million yen―58―

Consolidated fiscal year under review(From March 1, 2022 to February 28,
2023)－million yen

(Consolidated statement of comprehensive income)*1 Reclassification adjustments and tax effects relating to other comprehensive income
Previous consolidated fiscal year
(From March 1, 2021 to February
28, 2022)

Consolidated fiscal year underreview(From March 1, 2022 to February
28, 2023)

19million yen

48million yen－－

Valuation difference on available-for-salesecurities:
Amount arising during the period
Reclassification adjustments
Before tax-effect adjustment

19

48

(2)

(12)

17

36

Amount arising during the period

731

470

Reclassification adjustments

－

－

731

470

Amount of tax effects
Valuation difference on available-forsale securities
Foreign currency translation adjustment:

Before tax-effect adjustment
Amount of tax effects－－

Foreign currency translation adjustment

731

470

Remeasurements of defined benefit plans:
Amount arising during the period

57

164

Reclassification adjustments

2

(15)

Before tax-effect adjustment

58

149

Amount of tax effects
Remeasurements of defined benefit
plans, net of tax
Share of other comprehensive income ofentities accounted for using equity method:Amount arising during the period

(18)

(45)

41

103

47

17

Reclassification adjustments
Share of other comprehensive incomeof entities accounted for using equity
methodTotal other comprehensive income

－

－

47

17

836

627

―59―

(Consolidated statement of changes in equity)
Previous consolidated fiscal year (from March 1, 2021 to February 28, 2022)
1. Issued shares and treasury shares
Shares at the beginningof period

Increase during period

Decrease during period

Shares at the end of
periodCommon shares

9,696,500－－

9,696,500

Total

9,696,500－－

9,696,500

Common shares(Note 1)

321,070－

4,500

316,570

Total

321,070－

4,500

316,570

Issued shares

Treasury shares(Notes)1.

The decrease of 4,500 common shares held as treasury shares is due to disposal of treasury shares as restricted stockcompensation.

2.

Share acquisition rights and treasury share acquisition rights
Not applicable.

3.

Dividends(1) Amount of dividends paid
Resolution

Ordinary General
Meeting of
Shareholders on
May 28, 2021
Board of Directors
meeting on October
13, 2021

Types of shares

Total dividend
Dividend per shareamount(Yen)(Millions of yen)

Record date

Effective dateCommon shares

234

25.00

February 28, 2021

May 31, 2021

Common shares

188

20.00

August 31, 2021

November 11, 2021

(2) Dividend for which the record date falls in the consolidated fiscal year under review but the effective date comes after theend of that consolidated fiscal year
Resolution

Types ofshares

Source ofdividend

Ordinary General
Meeting of
Shareholders on
May 27, 2022

CommonsharesRetainedearnings

Total dividend
Dividend peramountshare (Yen)(Millions of yen)
188

―60―

20.00

Record date

Effective dateFebruary 28, 2022

May 30, 2022

Consolidated fiscal year under review (from March 1, 2022 to February 28, 2023)
1. Issued shares and treasury shares
Shares at the beginningof period

Increase during period

Decrease during period

Shares at the end of
periodCommon shares

9,696,500－－

9,696,500

Total

9,696,500－－

9,696,500

Common shares(Notes) 1, 2

316,570

162,000

9,600

468,970

Total

316,570

162,000

9,600

468,970

Issued shares

Treasury shares(Notes)1.
2.

The increase of 162,000 common shares held as treasury shares is due to repurchase of treasury shares through offauction treasury share repurchase trading (ToSTNeT-3).
The decrease of 9,600 common shares held as treasury shares is due to disposal of treasury shares as restricted stockcompensation.

2.

Share acquisition rights and treasury share acquisition rights
Not applicable.

3.

Dividends(1) Amount of dividends paid
Resolution

Ordinary General
Meeting of
Shareholders on
May 27, 2022
Board of Directors
meeting on October
13, 2022

Types of shares

Total dividend Dividend per shareamount(Yen)(Millions of yen)

Record date

Effective dateCommon shares

188

20.00

February 28, 2022

May 30, 2022

Common shares

185

20.00

August 31, 2022

November 11, 2022

(2) Dividend for which the record date falls in the consolidated fiscal year under review but the effective date comes after theend of that consolidated fiscal year
Resolution

Types ofshares

Source ofdividend

Ordinary General
Meeting of
Shareholders on
May 30, 2023

CommonsharesRetainedearnings

Total dividend
Dividend peramountshare (Yen)(Millions of yen)
185

―61―

20.00

Record date

Effective dateFebruary 28, 2023

May 31, 2023

(Consolidated statement of cash flows)*1 Reconciliation of cash and cash equivalents at end of period and the amount recorded in the consolidated balance sheet
Previous consolidated fiscal year
(From March 1, 2021 to February 28,
2022)

Consolidated fiscal year under review(From March 1, 2022 to February 28,
2023)

Cash and deposits
Time deposits with maturities ofmore than three months

4,001million yen

4,256million yen

(347)

(70)

Cash and cash equivalents

3,654

4,186

(Leases)(Borrower side)
1. Finance lease transactions
Finance lease transactions without transfer of ownershipi) Details of leased assets
Vehicles, tools, furniture and fixtures, and softwareii) Depreciation method of leased assets
As described in “4. Information on accounting policies (2) Depreciation methods for important depreciable assets” under“Important matters that are the basis for preparation of consolidated financial statements.”
2.

Operating lease transactions
Future minimum lease payments required under non-cancellable operating lease transactions(Millions of yen)
Consolidated fiscal year under review(February 28, 2023)

Previous consolidated fiscal year
(as of February 28, 2022)
Due within one year41

41

Due after one year

41

－

Total

83

41

―62―

(Financial instruments)
1. Overview of financial instruments(1) Policy to manage financial instruments
The MORESCO Group’s policy is to limit its fund management to short-term deposits, etc. and to raise its funds mainly
through borrowings from banks. The Group uses derivative instruments to hedge the risks below and does not enter into any
speculative transactions.
(2) Description of financial instruments, related risks, and risk management structure
Notes and accounts receivable - trade, which are operating receivables, are exposed to customers’ credit risks. For credit
risks, we have a system in which due dates and balances of operating receivables are managed for each business partner inaccordance with the credit management regulations, and the credit status of all business partners is reviewed once a year In
addition, the Company receives advances or guarantee deposits as necessary, with the aim of reducing credit risks. Moreover,due to the Group’s global business development, part of accounts receivable are exposed to exchange rate fluctuation risks.
However, these risks are hedged using forward exchange contracts as necessary.
Investment securities are mainly shares of companies with which the Company has business relationships and are
exposed to market price fluctuation risks. However, we regularly check the market price and financial position of eachissuing company and review the holding status.
All of the notes and accounts payable - trade, which are operating payables, are due within one year.
Among borrowings, short-term borrowings are mainly for operating transactions and long-term borrowings are mainly
for capital expenditures. Variable-rate borrowings are exposed to interest rate fluctuation risks. The Company uses fixed-rateborrowings for long-term borrowings in principle. For borrowings with variable interest rates, the Company uses derivativetransactions (interest rate swaps) for each individual contract as necessary to hedge the interest rate fluctuation risks and fix
the interest rates payable. The evaluation of hedge effectiveness is omitted as requirements for exceptional accounting ofinterest-rate swaps are met.
Derivative transactions are executed and managed in the Accounting Department in accordance with the internal
regulations that specify transaction responsibilities. In using derivatives, the Company uses only major financial institutions
with high social credibility.
Operating payables and borrowings are exposed to liquidity risks. However, the Group manages the liquidity risks bysuch measures as having each company prepare a monthly financing plan.
(3) Supplemental explanation on the fair value, etc. of financial instruments
The fair value of financial instruments includes the value based on their market prices, or the value reasonably calculated if
market prices are not available. Since the calculation of fair value of financial instruments reflects variable factors, it issubject to change depending on different assumptions used.

―63―

2.

fair value, etc. of financial instruments
Amounts posted on the consolidated balance sheet, fair values, and the corresponding differences between the two are as follows.
Instruments that do not have market prices (see Note 1) are not included.
Previous consolidated fiscal year (as of February 28, 2022)
Balance sheet amount(*10(Millions of yen)i)

Notes and accounts receivable trade
Allowance for doubtful accounts
(*3)

ii)

Fair value (*1)(Millions of yen)

Difference(Millions of yen)

6,844
(25)
6,819

6,819

－

199

199

－

(775)

(772)

(3)

(1)

(1)

－

Investment securities
Available-for-sale securitiesiii) Long-term borrowings(including current portion)iv) Derivative transactions

Consolidated fiscal year under review (as of February 28, 2023)
Balance sheet amount(*10(Millions of yen)

Fair value (*1)(Millions of yen)i)

Notes receivable - trade

1,235

ii)

Accounts receivable - trade

6,360

Allowance for doubtful accounts
(*3)

(22)

Difference(Millions of yen)

7,573

7,573

－

252

252

－

(832)

(826)

(5)

(1)

(1)

－

iii) Investment securities
Available-for-sale securitiesiv) Long-term borrowings(including current portion)v)

Derivative transactions

(*1)
(*2)

(*3)
(*4)

Items recorded as liabilities are presented in parentheses.
Notes to cash and deposits, notes and accounts payable - trade, income taxes payable, contract liability, and short-termborrowings are omitted, as these are settled within a short time frame and therefore have a fair value almost equal to theirbook value.
Allowance for doubtful accounts for notes and accounts receivable - trade is excluded.
Net receivables and payables, which were derived from derivative transactions, are presented in net amounts.
(Note 1) The instruments below are not included as they do not have market prices.
Category(Millions of yen)
Consolidated fiscal year under review(February 28, 2023)

Previous consolidated fiscal year
(as of February 28, 2022)

Unlisted shares
Shares of affiliated companies
Investments in capital

―64―

165

265

3

3

1,915

2,078

These are not included in “ii) Investment securities” of the previous consolidated fiscal year and “iii) Investment
securities” of the consolidated fiscal year under review, as they do not have market prices.
(Note 2) Redemption schedule after the balance sheet date for monetary receivables
Previous consolidated fiscal year (as of February 28, 2022)
Due after 5
Due after 1
Due within 1
years but
year butyear
within 10
within 5 years(Millions ofyears(Millions ofyen)(Millions of
yen)
yen)

Due after 10
years(Millions ofyen)Cash and deposits

4,001

－

－

－

Notes and accounts receivable - trade

6,844

－

－

－

10,845

－

－

－

Total

Consolidated fiscal year under review (as of February 28,
2023)
Due after 5
Due after 1
Due within 1
years but
Due after 10year butyear
within 10
years
within 5 years(Millions ofyears(Millions of(Millions ofyen)(Millions of
yen)
yen)
yen)
Cash and deposits

4,256

－

－

－

Notes receivable - trade

1,235

－

－

－

Accounts receivable - trade

6,360

－

－

－

11,851

－

－

－

Total

(Note 3) Redemption schedule after the balance sheet date for borrowings
Previous consolidated fiscal year (as of February 28, 2022)
Due after 1
Due after 2
Due after 3
Due after 4
Due within 1
Due after 5
year but
years but
years but
years but
year
years
within 2 years within 3 years within 4 years within 5 years(Millions of(Millions of(Millions of (Millions of (Millions of (Millions of
yen)
yen)
yen)
yen)
yen)
yen)
Short-term borrowings

135

－

－

－

－

－

Long-term borrowings

425

280

70

－

－

－

560

280

70

－

－

－

Total

Consolidated fiscal year under review (as of February 28, 2023)
Due after 1
Due after 2
Due after 3
Due after 4
Due within 1
Due after 5
year but
years but
years but
years but
year
years
within 2 years within 3 years within 4 years within 5 years(Millions of(Millions of(Millions of (Millions of (Millions of (Millions of
yen)
yen)
yen)
yen)
yen)
yen)
Short-term borrowings

2,021

－

－

－

－

－

Long-term borrowings

360

150

80

80

80

82

2,381

150

80

80

80

82

Total

―65―

3.

Matters relating to breakdown, etc. of fair values of financial instruments by level
fair values of financial instruments are classified into the following three levels based on the observability and materiality of
inputs used to calculate fair values.
Level 1 fair value:
Fair value calculated using observable inputs, i.e., quoted prices in active markets for assets or liabilities
that are the subject of the fair value measurement
Level 2 fair value:
Fair value calculated using observable inputs other than Level 1 inputs
Level 3 fair value:
Fair value calculated using unobservable inputs
When multiple inputs that have a significant impact on the calculation of fair value are used, the fair value is classified in thelevel with the lowest priority in the calculation of fair value among the levels to which those inputs belong.
i)

Financial instruments recorded in the consolidated balance sheet at fair value
Consolidated fiscal year under review (as of February 28, 2023)
Category

Fair value (Millions of yen)
Level 1

Investment securities
Available-for-salesecurities

Level 2

Level 3

Total

252

－

－

252

Total assets

252

－

－

252

Derivative transactions
Currency-related

－

1

－

1

Total liabilities

－

1

－

1

ii)

Financial instruments other than those recorded in the consolidated balance sheet at fair value
Consolidated fiscal year under review (as of February 28, 2023)
Category

Notes receivable - trade
Accounts receivable trade
Allowance for doubtful
accounts

Fair value (Millions of yen)
Level 1

Level 2

Level 3

Total

－

1,235

－

1,235

－

6,360

－

6,360

－

(22)

－

(22)

Total assets

－

7,573

－

7,573

Long-term borrowings(including current
portion)

－

826

－

826

Total liabilities

－

826

－

826

(Note) Valuation methods used for the measurement of fair value and a description of inputsi) Notes and accounts receivable - trade
Since these are settled in a short period of time, their fair value reflects the credit risk by deducting the allowance for
doubtful accounts. It is classified as Level 2 fair value.
ii) Investment securities
For investment securities, listed shares are valued using quoted prices. Since listed shares are traded in active markets, theirfair value is classified as Level 1 fair value.
iii) Long-term borrowings
The fair value of long-term borrowings is calculated by discounting the total amount of principal and interest by the assumed
interest rate that would be applied when new borrowings are conducted. It is classified as Level 2 fair value.
iv) Derivative transactions
The fair value of derivative transactions are calculated based on the prices, etc. presented by relevant financial institutions,etc. It is classified as Level 2 fair value.

―66―

(Securities)
1. Available-for-sale securities
Previous consolidated fiscal year (as of February 28, 2022)
Type

Balance sheet amount(Millions of yen)

(1) Stocks

Acquisition price(Millions of yen)

Difference(Millions of yen)

199

131

67

(2) Bonds
Securities whose
B/S amount exceeds
their acquisition
price

i)

National/local
government bonds

－

－

－

ii)

Corporate bonds

－

－

－

－

－

－

－

－

－

199

131

67

0

1

(0)

iii) Other(3) Other
Subtotal(1) Stocks(2) Bonds

Securities whose
B/S amount does notexceed theiracquisition pricei)

National/local
government bonds

－

－

－

ii)

Corporate bonds

－

－

－

－

－

－

－

－

－

0

1

(0)

199

132

67

iii) Other(3) Other
Subtotal
Total(Note) Unlisted shares (consolidated balance sheet amount: 165 million yen) are not included in the above table because they haveno market price and therefore it is deemed extremely difficult to ascertain their fair value.

―67―Consolidated fiscal year under review (as of February 28, 2023)
Type

Balance sheet amount(Millions of yen)

(1) Stocks

Acquisition price(Millions of yen)

Difference(Millions of yen)

251

136

115

(2) Bonds
Securities whose
B/S amount exceeds
their acquisition
price

i)

National/local
government bonds

－

－

－

ii)

Corporate bonds

－

－

－

－

－

－

－

－

－

251

136

115

0

1

(0)

iii) Other(3) Other
Subtotal(1) Stocks(2) Bonds

Securities whose
B/S amount does notexceed theiracquisition pricei)

National/local
government bonds

－

－

－

ii)

Corporate bonds

－

－

－

－

－

－

－

－

－

0

1

(0)

252

137

115

iii) Other(3) Other
Subtotal
Total(Note) Unlisted shares (consolidated balance sheet amount: 265 million yen) are not included in the above table because they areshares without a market price.
2.

Available-for-sale securities sold
Previous consolidated fiscal year (from March 1, 2021 to February 28, 2022)
Description is omitted due to its low materiality.
Consolidated fiscal year under review (from March 1, 2022 to February 28, 2023)
Description is omitted due to its low materiality.

―68―

(Derivative transactions)
1. Derivative transactions for which hedge accounting is not applied
Currency-related
Previous consolidated fiscal year (as of February 28, 2022)

Category

Transaction type

Notional amounts(Millions of yen)

Of notional amounts,
over 1 year (Millionsof yen)Fair value(Millions of yen)

Valuation gain or loss
(Millions of yen)

133

－

(1)

(1)

133

－

(1)

(1)

Forward foreignexchange contracts
Non-market
transactions

Sell:
USD
Total

(Note) Calculation method of fair value
Calculated based on prices, etc. presented by relevant financial institutions, etc.
Consolidated fiscal year under review (as of February 28, 2023)

Category

Transaction type

Notional amounts(Millions of yen)

Of notional amounts,
over 1 year (Millionsof yen)Fair value(Millions of yen)

Valuation gain or loss
(Millions of yen)

68

－

(1)

(1)

68

－

(1)

(1)

Forward foreignexchange contracts
Non-market
transactions

Sell:
USD
Total

2.

Derivative transactions for which hedge accounting is applied
Not applicable.

―69―

(Retirement benefits)
1. Outline of adopted retirement benefit plans
The Company and some of its consolidated subsidiaries in Japan use both a retirement lump-sum plan and a defined benefit
pension plan as the defined benefit-type systems and a defined contribution pension plan as the defined contribution-type system.
Some consolidated subsidiaries in Japan use both a retirement lump-sum plan and the Smaller Enterprise Retirement Allowance
Mutual Aid Scheme, and some overseas consolidated subsidiaries adopt both the defined benefit-type and defined contributiontype plans. Some consolidated subsidiaries apply the simplified method for calculation of net defined benefit liability andretirement benefit expenses by treating the required amount of payment at the end of fiscal year relating to retirement benefits asretirement benefit obligations.
2.

Defined-benefit plan
(1) Adjustments between the beginning and ending balances of retirement benefit obligations (except for plans using asimplified method presented in (3))

Retirement benefit obligations at the
beginning of the period
Service cost
Interest cost
Actuarial gains and losses
generated
Retirement benefits paid
Retirement benefit obligations at theend of the period

Previous consolidated fiscal year
(From March 1, 2021 to February 28,
2022)

Consolidated fiscal year under review(From March 1, 2022 to February 28,
2023)

2,890million yen

3,021million yen

208

205

16

15

(16)

(193)

(77)

(156)

3,021

2,892

(2) Adjustments between the beginning and ending balances of pension assets (except for plans using a simplified method
presented in (3))

Pension assets at the beginning of theperiodExpected return
Actuarial gains and losses
generated
Contribution from employers
Retirement benefits paid
Pension assets at the end of theperiodPrevious consolidated fiscal year
(From March 1, 2021 to February 28,
2022)

Consolidated fiscal year under review(From March 1, 2022 to February 28,
2023)

3,351million yen

3,584million yen

84

90

37

(34)

155

159

(43)

(134)

3,584

3,665

(3) Adjustments between the beginning and ending balances of net defined benefit liability for plans using a simplified method
Previous consolidated fiscal year
(From March 1, 2021 to February 28,
2022)

Consolidated fiscal year under review(From March 1, 2022 to February 28,
2023)

115million yen

118million yen

Net defined benefit liability at the
beginning of the period
Retirement benefit expenses
Retirement benefits paid
Net defined benefit liability at theend of the period

―70―

15

17

(11)

(25)

118

111

(4) Adjustments between the ending balances of retirement benefit obligations and pension assets and the net defined benefit
liability and net defined benefit asset reported on the consolidated balance sheet (including plans using a simplified method
presented in (3))
Previous consolidated fiscal year
(as of February 28, 2022)
Retirement benefit obligations forfunded plans
Pension assets
Retirement benefit obligations forunfunded plans
Net defined liability and asset
reported on the consolidated balance
sheetConsolidated fiscal year under review(February 28, 2023)

2,608million yen

2,505million yen(3,584)(3,665)(976)(1,160)

531

498

(445)

(662)

Net defined benefit liability

531

498

Net defined benefit asset
Net defined liability and asset
reported on the consolidated balance
sheet

(976)

(1,160)

(445)

(662)

(5) The amounts of components of retirement benefit expenses
Previous consolidated fiscal year
(From March 1, 2021 to February 28,
2022)

Consolidated fiscal year under review(From March 1, 2022 to February 28,
2023)

Service cost

208million yen

205million yen

Interest cost

16

15

Expected return
Amortization of actuarial gains andlossesRetirement benefit expenses
calculated using the simplified
methodRetirement benefit expenses related
to defined benefit plan

(84)

(90)

5

(11)

15

17

160

137

(6) Remeasurements of defined benefit plans reported under “Other comprehensive income”
Remeasurements of defined benefit plans (reported under “Other comprehensive income” in the statements ofcomprehensive income) (before tax effects) are as follows:
Previous consolidated fiscal year
(From March 1, 2021 to February 28,
2022)

Consolidated fiscal year under review(From March 1, 2022 to February 28,
2023)

58million yen

149million yen

Actuarial gains and losses(7) Remeasurements of defined benefit plans reported under “Accumulated other comprehensive income”
Remeasurements of defined benefit plans (reported under “Accumulated other comprehensive income” in the net assets
section in the consolidated balance sheets) (before tax effects) are as follows:
Previous consolidated fiscal year
(as of February 28, 2022)
Unrecognized actuarial gains andlosses275million yen―71―

Consolidated fiscal year under review(February 28, 2023)
423million yen

(8) Pension assetsi) Major components of pension assets
Ratio of each major component of pension assets is as follows:
Previous consolidated fiscal year
(as of February 28, 2022)

Consolidated fiscal year under review(February 28, 2023)

Bonds

62.3%

61.2%

Stocks

35.2

36.4

Other

2.5

2.4

Total

100.0

100.0

ii)

Method of setting the long-term expected return rate
To determine the long-term expected return rate on pension assets, we consider the current and expected allocation ofpension assets and the current and expected future long-term rates of return from the various assets that make up
pension assets.

(9) Actuarial assumptions used
Principal actuarial assumptions
Previous consolidated fiscal year
(as of February 28, 2022)
Discount rate

Mainly 0.5%

Long-term expected return rate
Expected salary increase rate
3.

Consolidated fiscal year under review(February 28, 2023)
Mainly 1.1%

2.5%

2.5%

Mainly 2.8%

Mainly 2.8%

Defined contribution plans
The required amounts of contribution to the defined contribution plans of the Company and its consolidated subsidiaries were 42
million yen for the previous fiscal year (from March 1, 2021 to February 28, 2022) and 43 million yen for the consolidated fiscal
year under review (from March 1, 2022 to February 28, 2023).
(Stock options)Not applicable.

―72―

(Tax effect accounting)
1. Major components of deferred tax assets and liabilities
Previous consolidated fiscal year
(as of February 28, 2022)

Consolidated fiscal year underreview(February 28, 2023)

Provision for bonuses

155million yen

137million yen

Net defined benefit liability

137

142

Tax loss carried forward (Note 1)

163

320

Enterprise tax payable

33

15

Other

105

59

Subtotal deferred tax assets
Valuation allowance for tax loss carried forward(Note 1)
Valuation allowance for the sum of deductible
temporary differences, etc.

592

673

(163)

(240)

(70)

(69)

Subtotal valuation allowance

(232)

(309)

Total deferred tax assets

360

365

Deferred tax assets

Deferred tax liabilities
Reserve for reduction entry of replaced property
Reserve for special account for advanced
depreciation of non-current assets
Net defined benefit asset

(6)

(6)

(204)

－

(198)

(224)

Other

(170)

(142)

Total deferred tax liabilities

(578)

(372)

Net deferred tax assets (liabilities)

(218)

(8)

(Note 1) Amounts of tax losses carried forward and deferred tax assets by carry-forward period
Previous consolidated fiscal year (as of February 28, 2022)
Due after 1 Due after 2 Due after 3 Due after 4
Due within year but years but years but years but Due after 5
1 year
within 2 within 3 within 4 within 5
years
Total
(Millions
years
years
years
years
(Millions (Millions of yen)of yen) (Millions (Millions (Millions (Millions of yen)of yen)of yen)of yen)of yen)Tax loss carried forward
4
6
0
1
152
163
－
(*1)
Valuation allowance

－

(4)

(6)

(0)

(1)

(152)

(163)

Deferred tax assets

－

－

－

－

－

－

－

(*1) Tax loss carried forward represents the amount after being multiplied by the statutory tax rate.
Consolidated fiscal year under review (as of February 28, 2023)
Due after 1 Due after 2 Due after 3 Due after 4
Due within year but years but years but years but Due after 5
1 year
within 2 within 3 within 4 within 5
years
Total
(Millions
years
years
years
years
(Millions (Millions of yen)of yen) (Millions (Millions (Millions (Millions of yen)of yen)of yen)of yen)of yen)Tax loss carried forward
5
6
0
0
35
273
320
(*2)
Valuation allowance

(5)

(6)

(0)

(0)

(35)

(193)

(240)

Deferred tax assets

－

－

－

－

－

80

(*3) 80(*2) Tax loss carried forward represents the amount after being multiplied by the statutory tax rate.
(*3) For tax loss carried forward of 236 million yen (the amount after being multiplied by the statutory tax rate),
deferred tax assets of 80 million yen were recognized. Valuation allowance has not been recognized for the portionof the said deferred tax assets that is deemed to be recoverable, due to factors such as taxable income expected to begenerated in the future.

―73―

2.

Net deferred tax assets (liabilities) for the previous fiscal year and the fiscal year under review are included in the following
accounts in the consolidated balance sheet:Previous consolidated fiscal year
(as of February 28, 2022)
Deferred tax assets - non-current assets

29million yen

Other - non-current liabilities
2.

(246)

Consolidated fiscal year underreview(February 28, 2023)
75million yen(83)

The reconciliation of significant differences between the statutory tax rate and effective income tax rate after application of tax
effect accounting
Previous consolidated fiscal year
(as of February 28, 2022)
Statutory tax rate

30.6%

(Reconciliations)
Permanently non-deductible amount(entertainment expenses, etc.)
Permanently non-taxable amount (dividend
income, etc.)
Special deduction of income taxes

0.2
(5.7)
(2.9)

Per capita tax

0.4

Increase (decrease) in valuation allowance
Difference in effective tax rate with consolidated
subsidiaries
Share of profit of entities accounted for using
equity method
Elimination of dividend income fromconsolidated subsidiaries
Amortization of goodwill

0.1
(1.6)
(2.6)
6.2
1.4

Other
Actual effective income tax rate after applicationof tax-effect accounting

3.1
29.2

(Business combinations, etc.)
Not applicable.
(Asset retirement obligations)
Description is omitted due to its low materiality.
(Lease property)
Description is omitted due to its low materiality.

―74―

Consolidated fiscal year underreview(February 28, 2023)
Description is omitted because
the difference between thestatutory tax rate and effective
income tax rate after applicationof tax effect accounting is 5/100
or lower.

(Revenue recognition)
1. Information regarding disaggregated revenue arising from contracts with customers
Consolidated fiscal year under review (from March 1, 2022 to February 28, 2023)(Millions of yen)
Reported segment
Category
Japan

China

Total

Southeast/South
Asia

North America

Specialty Lubricants

8,706

2,919

2,746

733

15,105

Hot melt adhesives

4,228

759

2,617

59

7,664

Other

6,462

136

506

219

7,323

Revenue arising from contracts
with customers

19,396

3,814

5,870

1,011

30,092

241

－

－

－

241

19,637

3,814

5,870

1,011

30,333

Other revenue
Revenues from external customers(Note) “Other” includes Liquid Paraffin & Sulfonates, Synthetic Lubricants, Energy Device Materials, and equipment sales.
2.

Useful information in understanding revenue
As described in “Important matters that are the basis for preparation of consolidated financial statements) 4. Information on
accounting policies, (4) Accounting standards for important income and expenses.”3.

Relationship between satisfaction of performance obligations based on contracts with customers and cash flows arising fromsuch contracts, and information on the amount and timing of revenue arising from contracts with customers that exist at theend of the fiscal year under review, which is expected to be recognized in and after the following fiscal year.
i) Balance, etc. of contract liabilities(Millions of yen)
Consolidated fiscal year under review

Receivables arising from contracts with customers (balance atthe beginning of the year)
Receivables arising from contracts with customers (balance atthe end of the year)

6,844
7,595

Contract liabilities (balance at the beginning of the year)

4

Contract liabilities (balance at the end of the year)

94

Balance at the end of the year of contract assets is mainly related to advances received from customers with regard toequipment sales contracts, for which revenue is recognized at the time of delivery. Contract liabilities are reversed inline with revenue recognition.
Of the amount of revenue recognized in the fiscal year under review, the amount included in the balance ofcontract liabilities at the beginning of the fiscal year was 4 million yen.
The reason for the increase of 89 million yen in contract liabilities in the consolidated fiscal year under review isdue to an increase in advances received.
ii)

Transaction prices allocated to remaining performance obligations
Since the Group has no important transactions with expected term of more than one year, the practical expedient isapplied and description of information on remaining performance obligations is omitted.
There are no material transactions in consideration arising from contracts with customers that are not included in
the transaction price.

―75―

Segment Information, etc.
Segment information
1. Outline of the reported segments
The Company’s reported segments are business units of the Company for which discrete financial information is available and forwhich the Board of Directors regularly conducts a review for the purpose of making decisions about management resources to beallocated to the segments and assessing the segment’s performance.
The Company manufactures and sells mainly chemical products (specialty lubricants, synthetic lubricants, liquid paraffin &sulfonates, hot melt adhesives). The Company is responsible for businesses in Japan, and local subsidiaries in China,
Southeast/South Asia, and North America are responsible for businesses in respective regions overseas. Overseas subsidiaries are
independent business management units, which formulate comprehensive strategies on products they deal with for their respective
areas and conduct business activities.
In view of this, the Company is comprised of four reportable segments organized by region based on manufacturing andsales structures: Japan, China, Southeast/South Asia, and North America. The “Japan” segment is engaged in a rental building
business besides the chemical products business.
2.

Explanation of measurements of sales, profit (loss), asset, liability, and other items for each reporting segment
The accounting method for the reported segments is mostly the same as described in “Important matters that are the basis for
preparation of consolidated financial statements.”
Profit figures of the reported segments are based on operating profit.
Intersegment sales or transfers are based on prevailing market prices.
As described in “Changes in accounting policies,” the Company has applied the Accounting Standard for Revenue
Recognition, etc. since the beginning of the consolidated fiscal year under review and changed the accounting treatment method
regarding revenue recognition. Accordingly, the method of measurement of profits or losses of business segments has also beenchanged. The impact of this change is minor.

3.

Disclosure of sales, profit (loss), asset, liability, and other items for each reporting segment
Previous consolidated fiscal year (from March 1, 2021 to February 28, 2022)
Reported segment
Japan

China

Southeast/So
North
uth Asia
America

Total(Millions of yen)
Adjustments(Notes) 1, 2

Consolidated
total(Note 3)

Net sales
Revenues from externalcustomers
Intersegment sales ortransfers

18,385

3,625

4,501

789

27,300－27,300

1,405

383

269

24

2,081

(2,081)－

19,790

4,008

4,770

813

29,381(2,081)

27,300

Segment profit

805

432

86

107

1,431

4

1,434

Segment assets

20,766

4,164

5,902

570

31,402(2,393)29,008Depreciation

753

91

218

9

1,070

－

1,070

Amortization of goodwill

127

－

－

－

127

－

127

Total

Other items

Investment in equity
1,914
1,914
1,914
－
－
－
－
method affiliates
Increase in property, plantand equipment, and
1,181
37
58
3
1,279
1,279
－
intangible assets(Notes) 1. Adjustments to segment profit of 4 million yen include 19 million yen for elimination of intersegment transactions, 16 million yen for adjustment of inventories and - 0 million yen for adjustment of allowance for doubtful accounts.
2. Adjustments to segment assets of -2,393 million yen include -3,279 million yen for intersegment elimination and 885
million yen for company-wide assets. Company-wide assets refer to the Company’s financial assets (cash anddeposits, and investment securities) that do not belong to reporting segments.
3. Segment profit has been adjusted for alongside operating profit on the consolidated financial statements.

―76―

Consolidated fiscal year under review (from March 1, 2022 to February 28, 2023)(Millions of yen)

Reported segment
Japan

China

Southeast/So
North
uth Asia
America

Total

Adjustments(Notes) 1, 2

Consolidated
total(Note 3)

Net sales
Revenues from externalcustomers
Intersegment sales ortransfers

19,637

3,814

5,870

1,011

30,333－30,333

1,444

439

156

34

2,073

(2,073)－21,081

4,254

6,026

1,045

32,406(2,073)30,333

Segment profit

33

311

123

87

553

(30)

523

Segment assets

23,054

5,166

6,236

706

35,163(3,146)32,017

Depreciation

754

109

226

9

1,099

－

1,099

Amortization of goodwill

127

－

－

－

127

－

127

Total

Other items

Investment in equity
2,077
2,077
2,077
－
－
－
－
method affiliates
Increase in property, plantand equipment, and
757
478
84
0
1,318
1,318
－
intangible assets(Notes) 1. Adjustments to segment profit of -30 million yen include 1 million yen for elimination of intersegment transactions,-30 million yen for adjustment of inventories and - 1 million yen for adjustment of allowance for doubtful accounts.
2. Adjustments to segment assets of -3,146 million yen include -3,779 million yen for intersegment elimination and 633
million yen for company-wide assets. Company-wide assets refer to the Company’s financial assets (cash anddeposits, and investment securities) that do not belong to reporting segments.
3. Segment profit has been adjusted for alongside operating profit on the consolidated financial statements.

―77―

Information associated with reported segments
Previous consolidated fiscal year (from March 1, 2021 to February 28, 2022)
1. Information for each product or service(Millions of yen)
LiquidSpecialty Synthetic
Paraffin &Lubricants Lubricants
Sulfonates
Revenues fromexternal customers
2.

13,021

1,974

Hot melt
adhesives

Energydevicematerials

6,785

237

3,480

Other
chemicalproducts

Rentalbuilding
business

1,794

8

Total
27,300Information for each region(1) Net sales(Millions of yen)Japan

Asia (excluding
China)

China

16,816

3,977

North America

5,456

Other

918

Total
134

27,300(Note) Net sales are classified by country or region based on the geographic location of the customers.
(2) Property, plant and equipment
Japan

China
5,826

3.

(Millions of yen)
Asia (excluding China)
893

1,568

18

8,304

(Millions of yen)
Net sales

Relevant segment

Matsumura Oil Corporation

4,354

Japan

Consolidated fiscal year under review (from March 1, 2022 to February 28, 2023)
Information for each product or service
LiquidSpecialty Synthetic
Paraffin &Lubricants Lubricants
Sulfonates

Revenues fromexternal customers
2.

Total

Information for each of main customers
Name

1.

North America

15,105

1,703

3,793

Hot melt
adhesives

Energydevicematerials

Otherchemicalproducts

7,664

209

1,859

(Millions of yen)
Rentalbuilding
Totalbusiness

Information for each region(1) Net sales
Japan(Millions of yen)
Asia (excluding
China)

China

18,84130,333－

3,969

North America

6,327

Other

1,026

Total
171

30,333(Note) Net sales are classified by country or region based on the geographic location of the customers.
(2) Property, plant and equipment
Japan(Millions of yen)

China
5,788

Asia (excluding China)
1,285

1,523

―78―

North America

Total
14

8,610

3.

Information for each of main customers(Millions of yen)Name

Net sales

Matsumura Oil Corporation

Relevant segment
4,809

Japan

Disclosure of impairment loss on non-current assets for each reported segment
Previous consolidated fiscal year (from March 1, 2021 to February 28, 2022)
Not applicable.
Consolidated fiscal year under review (from March 1, 2022 to February 28, 2023)
Not applicable.
Amortization and unamortized balance of goodwill for each reported segment
Previous consolidated fiscal year (from March 1, 2021 to February 28, 2022)(Millions of yen)Japan
Amortization of
goodwill
Balance at end of
periodChina

Southeast/South Asia

North America

Total

127

－

－

－

127

219

－

－

－

219

Consolidated fiscal year under review (from March 1, 2022 to February 28, 2023)(Millions of yen)Japan
Amortization of
goodwill
Balance at end of
periodChina

Southeast/South Asia

North America

Total

127

－

－

－

127

92

－

－

－

92

Information about gain on bargain purchase for each reported segment
Not applicable.

―79―

Related parties
1. Transactions with related parties
Transactions of the Company with related parties
Parent company and major shareholders, etc. of the Company
Previous consolidated fiscal year (from March 1, 2021 to February 28, 2022)

Type

Name

Major
shareholder

Matsumura
Oil
Corporation

Location

Kita-ku,
Osaka

Business

Holding(held) ratioof votingrights (%)

Relation

Manufactureand sale of
70 industrial
lubricants,
etc.

(Holding)
Direct2.1(Held)
Direct11.3

Sales of theCompany’s
products andpurchase ofmaterials

Capital(Millions ofyen)Transactions

Amount(Millions ofyen)

Sales ofproducts(Note 1)

Account item

Accounts
4,186 receivable tradeYear-endbalance(Millions of
yen)

1,106

Consolidated fiscal year under review (from March 1, 2022 to February 28, 2023)

Type

Name

Location

Major
shareholder

Matsumura
Oil
Corporation

Kita-ku,
Osaka(Note 1)

Capital(Millions ofyen)

Business

Manufactureand sale of
70 industrial
lubricants,
etc.

Holding(held) ratioof votingrights (%)
Ratio (%)
(Holding)
Direct2.1(Held)
Direct11.5

Relation

Sales of theCompany’s
products andpurchase ofmaterials

Transactions

Sales ofproducts(Note 1)

Amount(Millions ofyen)Account item

Accounts
4,645 receivable tradeYear-endbalance(Millions of
yen)

1,214

Transaction terms and policies to determine them
The terms for sales of the Company’s products are determined in light of market prices, considering the economic
rationality, and in accordance with the basic sales agreement.

―80―

(Per-share information)
Previous consolidated fiscal year
(From March 1, 2021 to February 28,
2022)

Consolidated fiscal year under review(From March 1, 2022 to February 28,
2023)

Net assets per share

1,914.94

2,008.49

Earnings per share

192.7666.19

Not provided because there are no
dilutive shares.
(Note 1) Calculation basis of earnings per share is as follows.

Diluted earnings per share

Not provided because there are no
dilutive shares.

Previous consolidated fiscal
year(From March 1, 2021 to
February 28, 2022)

Consolidated fiscal year underreview(From March 1, 2022 toFebruary 28, 2023)

1,808

615

－

－

1,808

615

9,378,512

9,284,344

Previous consolidated fiscal
year(as of February 28, 2022)

Consolidated fiscal year underreview(February 28, 2023)

20,551

21,240

2,589

2,706

(2,589)(2,706)

17,962

18,5339,379,930

9,227,530

Profit attributable to owners of parent (millions ofyen)Amount not attributable to common shareholders(Millions of yen)
Profit attributable to owners of parent pertaining
to common stock (Millions of yen)
Average number of shares of common stock
outstanding during the period (Shares)(Note 2) Calculation basis of net assets per share is as follows.

Total net assets (Millions of yen)Amount deducted from total net assets(Millions of yen)
(Of which, non-controlling interests (Millionsof yen))Net assets at the end of the fiscal year related tocommon shares (Millions of yen)
The number of common shares at the end of the
fiscal year used to calculate net assets per share(Shares)―81―

(Significant subsequent events)(Expropriation of the plant site of a Chinese affiliate)
Wuxi More Tex Technology Co., Ltd., an equity method affiliate of the Company, resolved at the extraordinary general meetingof shareholders held on April 13, 2023 to accept the expropriation of its plant site by the Wuxi City authorities.
1. Background of the expropriation
Wuxi More Tex Technology Co., Ltd. is located in the Xinwu District, Wuxi, Jiangsu, P.R. China, which is an area undergoingland readjustment due to rapid urbanization and commercialization, and it has become difficult to continue production activities inthis area. Recently, the Wuxi City government requested the company to leave the current location by December 31, 2023, and thecompany resolved to accept this request.
2. Overview of the company subject to expropriation

3.

(1) Name

Wuxi More Tex Technology Co., Ltd.

(2) Location

No. 28, Changjiang Road, Xinwu District, Wuxi, Jiangsu, P.R. China(3) Title and name of representative

Nobuhiro Sewaki, President(4) Business line

Manufacture of specialty lubricants and hot melt adhesives(5) Investment in capital

USD 3 million(6) Date of establishment

March 2001

(7) Shareholders and ownership ratio

The Company: 50%, Tex Year Industries, Inc.: 50%(8) Relationship with the Company

Capitalrelationship
Personal
relationship
Businessrelationship

It is an equity method affiliate of the Company.
Two officers and one regular employee of the Company serve
as officers.
The Company provides materials.

Future outlook
Production of specialty lubricants in China will be transferred to MORESCO (ZHEJIANG) FUNCTION MATERIAL CO., LTD.,
which is now under construction in Haining, Zhejiang, by the end of November 2023.
For the above expropriation, compensation will be paid by the municipal authorities. On the other hand, costs are expected toarise in association with the transfer of production site. We are currently examining the specific amount of the costs. As theimpact of this on consolidated business performance, “share of profit of entities accounted for using equity method” will berecorded for the fiscal year ending February 2025.

―82―

v)

Consolidated supplemental schedules
Detailed schedule of bonds payableNot applicable.
Detailed schedule of borrowings
Category

Balance at beginning Balance at end of
Average interest rateof period
period(%)(Millions of yen)
(Millions of yen)

Maturity date

Short-term borrowings

135

2,021

0.8

―

Current portion of long-termborrowings

425

360

0.4

―

Current portion of lease obligations

36

37

－

―

350

472

0.4

2024 - 2032

22

98

－

2024 - 2028

968

2,988

―

―

Long-term borrowings (excluding
current portion )Lease obligations (excluding current
portion )Total(Notes)

1.
2.
3.
4.

The average interest rate represents the weighted-average rate applicable to the year-end balance of borrowings.
Current portion of long-term borrowings is included in “Short-term borrowings” on the consolidated balance sheet.
The average interest rate of lease obligations is not provided because lease obligations are recorded on the
consolidated balance sheet before deducting the amount equivalent to interest included in the total lease payment.
The aggregate annual maturities of long-term borrowings and lease obligations (excluding the current portion) within
five years after the consolidated balance sheet date are as follows.
Due after 1 year but
within 2 years(Millions of yen)

Due after 2 years but Due after 3 years but Due after 4 years but
within 3 years
within 4 years
within 5 years(Millions of yen)
(Millions of yen)
(Millions of yen)

Long-term
borrowings

150

80

80

80

Leased obligations

39

24

19

14

Detailed schedule of asset retirement obligations
The amounts of asset retirement obligations at the beginning and the end of the current fiscal year are one percent or less ofthe total liabilities and net assets at the beginning and the end of the current fiscal year. Accordingly, the preparation of theschedules has been omitted pursuant to the provision of Article 92-2 of the Regulations on Consolidated Financial
Statements.

―83―

(2) Other
Quarterly financial information and others for the fiscal year under review(Cumulative period)First quarter

Second quarter

Consolidated fiscal
year under review

Third quarter

Profit before income
taxes(Millionsof yen)(Millionsof yen)Profit attributable toowners of parent(Millionsof yen)

317

504

719

615

Earnings per share

(Yen)

33.84

53.94

77.24

66.19

Net sales(Accounting period)
Earnings (loss) per
share

(Yen)

7,050

14,52322,47930,333

471

846

1,144

1,046

First quarter

Second quarter

33.84

20.04

―84―

Third quarter
23.27

Fourth quarter(11.27)

2.

Non-Consolidated Financial Statements, etc.
(1) Non-Consolidated Financial Statementsi) Non-consolidated balance sheet(Millions of yen)Previous fiscal year
(as of February 28, 2022)

Fiscal year under review(February 28, 2023)

AssetsCurrent assets
Cash and deposits
Notes receivable - trade
Accounts receivable - trade
Merchandise and finished goods
Raw materials and supplies
Other

836
801

*1 835565*1 3,439*1 3,550

1,651

1,942

940

1,306

*1 706*1 1,199

(8)

(9)

8,364

9,389

Property, plant and equipment
Buildings

1,944

1,845

Structures
Machinery and equipment

59
662

61
553

Allowance for doubtful accounts
Total current assets
Non-current assets

VehiclesTools, Furniture and fixtures0

0*2 248*2 206

Land
Leased assets

1,328
1

1,328
9

Construction in progress
Total property, plant and equipment

7

44

4,250

4,046

219
50

92
65

Intangible assets
Goodwill
Software
Other

26

4

Total intangible assets

295

160

Investments and other assets
Investment securities

282

426

839

839

1,526

2,329

Shares of affiliated companies
Investments in capital of subsidiaries andassociates
Deferred tax assets
Long-term loans receivable
Long-term prepaid expenses
Prepaid pension cost
Other
Total investments and other assets
Total non-current assets
Total assets

―85―

－

73

*1 1,671*1 2,137

15

8

616
97

696
96

5,046

6,604

9,590

10,81017,95520,200(Millions of yen)Previous fiscal year
(as of February 28, 2022)

Fiscal year under review(February 28, 2023)

Liabilities
Current liabilities
Notes payable - trade
Accounts payable - trade*1 481*1 572*1 2,171*1 2,724

Short-term borrowings
Leased obligations

425
1

2,080
2

Accounts payable - otherAccrued expenses*1 498*1 552

97

90

327
448

78
387

Other

*1 619*1 585

Income taxes payable
Provision for bonuses
Total current liabilities

5,067

7,071

Non-current liabilities
Long-term borrowings

350

310

Leased obligations
Deferred tax liabilities－
65

Provision for retirement benefits
Other

308
27

Total non-current liabilities

8
－
333
5

750

655

5,816

7,726

2,118

2,118

Capital surplus
Legal capital surplus

1,906

1,906

Other capital surplus

67

68

Total capital surplus

1,973

1,974

75

75

15

14

Total liabilities
Net assets
Shareholders’ equity
Capital stock

Retained earnings
Legal retained earnings
Other retained earnings
Reserve for reduction entry of replaced
property
Reserve for special account for advanced
depreciation of non-current assets
General reserve

463

－

5,550

6,050

Retained earnings brought forward

2,305

2,752

8,407

8,891

Total retained earnings
Treasury shares

(384)

(567)

Total shareholders’ equity

12,115

12,416

23

58

23

58

12,13812,474

17,95520,200

Valuation and translation adjustments
Valuation difference on available-for-salesecurities
Total valuation and translation adjustments
Total net assets
Total liabilities and net assets

―86―

ii)

Non-consolidated statement of income

Net sales
Cost of sales

Previous fiscal year
(From March 1, 2021
to February 28, 2022)*2 16,288*2 10,958

Gross profit
Selling, general and administrative expenses
Operating profit(Millions of yen)
Fiscal year under review(From March 1, 2022
to February 28, 2023)*2 17,162*2 12,407

5,330

4,756

*1, *2 4,673*1, *2 4,677

656

79

Non-operating income
Interest and dividend income*2 511*2 677

Foreign exchange gains
Other

94

235

*2 38

*2 27

Total non-operating income

643

938

Non-operating expenses
Interest expenses

*2 10

*2 10

Loss on retirement of non-current assets
Other

3
3

2
2

Total non-operating expenses

16

13

1,284

1,004

*3 833－

Ordinary profit
Extraordinary income
Gain on sale of non-current assets
Total extraordinary income

833－

Profit before income taxes

2,117

1,004

Income taxes - current
Income taxes - deferred

363
103

296
(147)

467

149

1,650

856

Total income taxes
Profit―87―iii) Non-consolidated statement of changes in equity
Previous fiscal year (from March 1, 2021 to February 28, 2022)(Millions of yen)
Shareholders’ equity
Capital surplus

Retained earnings
Other retained earnings

Balance at beginning of
periodCapital stock

Legal capitalsurplus

Other capitalsurplus

2,118

1,906

68

Reserve for
Total capital Legal retained Reserve for special accountreduction entry for advanced
surplusearningsof replaced depreciation ofproperty
non-current
assets
1,974

75

318

－

Changes during period
Reversal of reserve for
reduction entry of
replaced property
Provision for reserve
for special account foradvanced depreciationof non-current assets－

Profit－Balance at end of period

463－

Dividends of surplus

Disposal of treasury
sharesNet changes in items
other than shareholders’equityTotal changes during
period

(303)

－

(0)

(0)
－

－

－

(0)

(0)

－

(303)

463

2,118

1,906

67

1,973

75

15

463

Valuation and translation
adjustments

Shareholders’ equity
Retained earnings
Other retained earnings
Generalreserve
Balance at beginning of
period5,550

Retainedearnings
brought
forward

Total retained
earnings

Valuation
Total
Total valuation Total net assets
difference onshareholders’and translation
available-forequity
adjustments
sale securities

Treasuryshares

1,236

7,179

(390)

10,88222

22

10,904

303

－

－

－

(463)

－

－

－

Dividends of surplus

(422)

(422)

(422)

(422)

Profit

1,650

1,650

1,650

1,650

5

5

Changes during period
Reversal of reserve for
reduction entry of
replaced property
Provision for reserve
for special account foradvanced depreciationof non-current assets

Disposal of treasury
sharesNet changes in items
other than shareholders’equityTotal changes during
periodBalance at end of period

5

－
－

－

2

2

2

－

1,069

1,228

5

1,233

2

2

1,234

5,550

2,305

8,407

(384)

12,11523

23

12,138―88―

Fiscal year under review (from March 1, 2022 to February 28, 2023)(Millions of yen)
Shareholders’ equity
Capital surplus

Retained earnings
Other retained earnings

Balance at beginning of
periodCapital stock

Legal capitalsurplus

Other capitalsurplus

2,118

1,906

67

Reserve for
Total capital Legal retained Reserve for special accountreduction entry for advanced
surplusearningsof replaced depreciation ofproperty
non-current
assets
1,973

75

15

463

Changes during period
Reversal of reserve for
reduction entry of
replaced property
Reversal of reserve for
special account foradvanced depreciationof non-current assets
Provision for generalreserve－－

Profit－Balance at end of period

(463)

－

Dividends of surplus

Purchase of treasury
shares
Disposal of treasury
sharesNet changes in items
other than shareholders’equityTotal changes during
period

(1)

－

－
1

1
－

－

－

1

1

－

(1)

(463)

2,118

1,906

68

1,974

75

14

－

Valuation and translation
adjustments

Shareholders’ equity
Retained earnings
Other retained earnings
Generalreserve
Balance at beginning of
period5,550

Retainedearnings
brought
forward

Total retained
earnings

Treasuryshares(384)

Valuation
Total
Total valuation Total net assets
difference onshareholders’and translation
available-forequity
adjustments
sale securities

2,305

8,407

12,11523

23

12,138

1

－

－

－

463

－

－

－

(500)

－

－

－

Dividends of surplus

(372)

(372)

(372)

(372)

Profit

856

856

856

856

Changes during period
Reversal of reserve for
reduction entry of
replaced property
Reversal of reserve for
special account foradvanced depreciationof non-current assets
Provision for generalreserve

Purchase of treasury
shares
Disposal of treasury
sharesNet changes in items
other than shareholders’equityTotal changes during
periodBalance at end of period

500

－

(194)

(194)

(194)

－

12

12

12

－

－

35

35

35

500

447

483

(183)

301

35

35

336

6,050

2,752

8,891

(567)

12,41658

58

12,474

―89―

1.

Notes
(Significant accounting policies)
Standards and methods for evaluating assets(1) Standards and methods for evaluating securities
Shares in subsidiaries and affiliates
Moving average cost method
Available-for-sale securities
Securities other than shares without a market price
Fair value method (unrealized gain and loss, net of tax are recorded in net assets, and the moving average method
is used to calculate the cost of securities sold)Shares without a market priceMoving average cost method(2) Standards and methods for evaluating derivatives
Fair value method(3) Standards and methods for evaluating inventories
Mainly gross average cost method(The balance sheet values are calculated by writing down the book values in response to decreased profitability)2.

Depreciation method of non-current assets(1) Property, plant and equipment (excluding leased assets)
The declining-balance method is adopted. (However, the straight-line method is used for buildings (excluding facilities
attached to buildings) acquired on or after April 1, 1998, and facilities attached to buildings and structures acquired on orafter April 1, 2016.) Major useful lives are as follows.
Buildings: 3 to 50 years
Machinery and equipment: 4 to 15 years(2) Intangible assets
The straight-line method is adopted. For software used in-house, the straight-line method is adopted based on the usable
period inside the company (5 years).
(3) Leased assets
Leased assets relating to finance lease without transfer of ownership
The straight-line method is used with a useful life of the lease period and with a residual value of zero.

3.

Accounting standards for important reserves and allowances(1) Allowance for doubtful accounts
In order to prepare for possible losses on uncollectible receivables held, estimated uncollectible amounts are posted: forgeneral receivables, according to the historical percentage of uncollectibles, and for doubtful receivables, considering theprobability of collection.
(2) Provision for bonuses
In order to prepare for payment of bonuses to employees, a provision is made based on the estimated bonus payments, which
are attributable to the fiscal year under review.

―90―(3) Provision for retirement benefits
In order to prepare for payment of retirement benefits to employees, a provision is made based on the estimated amounts ofretirement benefit obligations and pension assets at the end of the fiscal year under review.
i) Method to attribute the estimated retirement benefits to the periods
To calculate retirement benefit obligations, the benefit formula method is adopted as a method to attribute the estimatedretirement benefits to the periods up to the end of the fiscal year under review.
ii) Method of amortization of actuarial gains and losses
The actuarial differences are recognized in the following fiscal year by the straight-line method over a certain period(mainly 14 years) that are not more than the average remaining service period of employees at the time of the accrual ofa difference.
4.

Accounting standards for important income and expenses
The main business of the Company is manufacture and sale of chemical products (specialty lubricants, synthetic lubricants, liquidparaffin & sulfonates, hot melt adhesives, and energy device materials). With regard to sale of such goods and products, theGroup determines that control of goods is transferred to customers at the time of delivery. As the period between shipment anddelivery is a normal period of time, the Group applies alternative treatment based on importance, etc., and recognizes revenue atthe time of shipment of goods and products for inside Japan. For overseas, based on the terms of trade stipulated by Incoterms,
etc., the Group determines that control of goods and products is transferred to customers and its performance obligations are
satisfied when risks are transferred to customers. Therefore, the Group recognizes revenue at the time of shipment of goods andproducts in principle.

5.

Other important matters that are the basis for preparation of non-consolidated financial statements(1) Method and period of amortization of goodwill
Goodwill is regularly amortized using the straight-line method over an effective period up to 20 years. However, minor
goodwill is entirely amortized all at once.
(2) Accounting treatment for retirement benefits
The method of accounting treatment for unrecognized actuarial gains and losses on retirement benefits is different from themethod of accounting treatment used in the consolidated financial statements.
(3) Accounting principles and procedures that were adopted when relevant accounting standards, etc. were unclear
Restricted stock compensation system
Remuneration, etc. paid to directors of the Company based on the Company’s restricted stock compensation system istreated as expenses over the applicable service period.

―91―

(Important accounting estimates)
1. Valuation of inventories(1) Amount recorded in the non-consolidated financial statements for the fiscal year under review(Millions of yen)Previous fiscal year
Fiscal year under review
Merchandise and finished goods
Raw materials and supplies

1,651

1,942

940

1,306

Cost of sales(62)
For loss on valuation of inventories (reversal), net amount after reversal is stated.

34(2) Information on the details of accounting estimates
Notes are omitted because the same information is provided in “Notes (Important accounting estimates)”to consolidated
financial statements.
2.

Impairment losses on non-current assets(1) Amount recorded in the non-consolidated financial statements for the fiscal year under review(Millions of yen)Previous fiscal year
Fiscal year under review
Property, plant and equipment
Intangible assets

4,250

4,046

295

160

(2) Information on the details of accounting estimates
Notes are omitted because the same information is provided in “Notes (Important accounting estimates)”to consolidated
financial statements.

―92―

(Changes in accounting policies)(Application of the Accounting Standard for Revenue Recognition, etc.)
The Company has applied the “Accounting Standard for Revenue Recognition” (Accounting Standards Board of Japan (ASBJ)
Statement No. 29, March 31, 2020; hereinafter, the “Revenue Recognition Accounting Standard”), etc., effective from the
beginning of the fiscal year under review, and recognizes revenue in the amount expected to be received in exchange for promised
goods or services at the time when control of these goods or services is transferred to customers.
The application of the Revenue Recognition Accounting Standard, etc. is subject to the transitional treatment provided for in
the proviso to Paragraph 84 of the Revenue Recognition Accounting Standard. The cumulative effect of the retroactive applicationof the new accounting policy, assuming that it has been applied to periods prior to the beginning of the fiscal year under review, isadded to or subtracted from retained earnings at the beginning of the fiscal year under review, and the new accounting policy isapplied from the beginning balance. However, by applying the method stipulated in Paragraph 86 of the Revenue Recognition
Accounting Standard, the new accounting policy has been retroactively applied to contracts in which nearly all amounts ofrevenue were recognized in accordance with the previous treatment before the beginning of the fiscal year under review. This has
no impact on the beginning balance.
Details of changes due to the application of this accounting standard are as follows.
・ Sales of products to customers
The Company has changed its method to recognize revenue when risks are transferred to customers in accordance with theterms of trade stipulated by Incoterms, etc., for contracts of export sales to which the shipment standard was conventionallyapplied but risks are not transferred at the time of shipment.
・ Paid receipt transactions
For paid receipt transactions, in which the Company purchases raw materials, etc. from its customers and sells them back tothe same customers after processing them, the Company has changed its method to recognize revenue by the net amount of
the consideration less the purchase prices of the raw materials, from the conventional method of recognizing revenue by the
total amount of consideration including the purchase prices of the raw materials, etc. The ending inventory of raw materials,
which was included in inventories, is now included in “Other” under current assets.
・ Paid supply transactions
For paid supply transactions, we conventionally recognized extinguishment with regard to the goods supplied with payment.
But when we are obliged to buy back the supplied goods, we now continue to recognize such supplied goods and also
recognize liabilities related to paid supply transactions for the ending inventory of the supplied goods remaining at recipients
thereof.
・ Agent transactions
For transactions with agents, the amount of consideration that customers pay less the commission fees paid to agents wasconventionally recognized as revenue. But the Company has changed the method for some agents to recognize the total
amount of consideration that customers pay as revenue and recognize fees to agents as expenses.
As a result, the impact on the non-consolidated financial statements of the fiscal year under review is minor. In
accordance with the transitional treatment provided for in Paragraph 89-3 of the Revenue Recognition Accounting Standard,notes to “Revenue recognition” relating to the previous fiscal year are not presented.
(Application of the Accounting Standard for Fair Value Measurement, etc.)
The Company has applied the “Accounting Standard for Fair Value Measurement” (ASBJ Statement No. 30, July 4, 2019;
hereinafter, the “Fair Value Measurement Accounting Standard”), etc., effective from the beginning of the fiscal year underreview. And, in accordance with the transitional treatment provided for in Paragraph 19 of the Fair Value Measurement
Accounting Standard and Paragraph 44-2 of the “Accounting Standard for Financial Instruments” (ASBJ Statement No. 10, July4, 2019), the Company will apply the new accounting policy prescribed by the Fair Value Measurement Accounting Standard, etc.
into the future. However, this application has no impact on the non-consolidated financial statements.
(Changes in presentation)
Not applicable.
(Supplementary information)(Accounting estimates relating to the impact of the spread of COVID-19)
Note on accounting estimates relating to the impact of the spread of COVID-19 is omitted because the same information isprovided in “Notes (Additional Information)” to the consolidated financial statements.

―93―

(Non-consolidated balance sheet)*1 Receivables from and payables to subsidiaries and associates
Previous fiscal year
(as of February 28, 2022)
Short-term receivables*2

1,056million yen

1,399million yen

Short-term payables

747

817

Long-term receivables

1,671

2,137

Reduction entry
Total reduction entries due to acquisition of government subsidies, etc. for property, plant and equipment are as follows.
Previous fiscal year
(as of February 28, 2022)
Tools, Furniture and fixtures3.

Fiscal year under review(February 28, 2023)

11million yen

Fiscal year under review(February 28, 2023)
11million yen

Guarantee obligations
We provide guarantees on borrowings, etc. of subsidiaries and associates below.
Borrowings
Previous fiscal year
(as of February 28, 2022)
TIANJIN MORESCOTECHNOLOGY CO., LTD.
PT.MORESCO MACROADHESIVE

Fiscal year under review(February 28, 2023)

135million yen

170million yen－

95(Non-consolidated statement of income)*1 Selling expenses account for 36% in the previous fiscal year and 35% in the fiscal year under review. General and administrative
expenses account for 64% in the previous fiscal year and 65% in the fiscal year under review.
Major components and amounts are as follows.
Previous fiscal year
(From March 1, 2021 to February 28,
2022)
Salaries*2

1,308million yen

Fiscal year under review(From March 1, 2022 to February 28,
2023)
1,307million yen

Provision for bonuses

327

286

Retirement benefit expenses
Provision of allowance for doubtful
accounts
Depreciation

109

96

(0)

0

414

341

Freightage expenses

516

561

Transactions with subsidiaries and associates
Previous fiscal year
(From March 1, 2021 to February 28,
2022)

Fiscal year under review(From March 1, 2022 to February 28,2023)

Net sales

1,492million yen

1,550million yen

Purchase of goods
Selling, general and administrative
expensesNon-operating transactions

1,059

1,094

34

13

514

676

―94―

*3

Details of gain on sales of non-current assets are as follows.
Previous fiscal year
(From March 1, 2021 to February 28,
2022)
Land, buildings and structures, etc.

Fiscal year under review(From March 1, 2022 to February 28,
2023)

833million yen－million yen(Securities)
Shares in subsidiaries (839 million yen recorded for fiscal year under review and 839 million yen recorded for previous fiscal year
on the balance sheet) are not presented because they are shares without a market price.
(Tax effect accounting)
1. Major components of deferred tax assets and liabilities
Previous fiscal year
(as of February 28, 2022)

Fiscal year under review(February 28, 2023)

Deferred tax assets
Provision for bonuses

137million yen

118million yen

Provision for retirement benefits

94

102

Loss on valuation of inventories
Loss on valuation of shares of subsidiaries andassociates
Other

31

42

28

28

108

76

Subtotal deferred tax assets

399

365

Valuation allowance

(55)

(54)

Total deferred tax assets

344

311

(6)

(6)

(204)

－

(188)

(213)

(10)

(19)

Total deferred tax liabilities

(409)

(238)

Net deferred tax assets (liabilities)

(65)

73

Deferred tax liabilities
Reserve for reduction entry of replaced
property
Reserve for special account for advanced
depreciation of non-current assets
Prepaid pension cost
Other

2.

The reconciliation of significant differences between the statutory tax rate and effective income tax rate after application of tax
effect accounting
Previous fiscal year
(as of February 28, 2022)

Fiscal year under review(February 28, 2023)

Statutory tax rate

30.6%

30.6%

(Reconciliations)
Permanently non-deductible amount(entertainment expenses, etc.)
Permanently non-taxable amount (dividend
income, etc.)

0.3

1.3

(6.6)

(18.5)

Special deduction of income taxes

(3.9)

(7.6)

Per capita tax
Withholding tax on dividends from foreignsubsidiaries
Amortization of goodwill

0.5

1.0

2.1

6.3

1.8

3.9

Other
Actual effective income tax rate after applicationof tax-effect accounting

(2.7)

(2.3)

22.1

14.8

(Business combinations, etc.)
Not applicable.

―95―

(Revenue recognition)
Note to useful information in understanding revenue arising from contracts with customers is omitted because the same
information is provided in “Notes (Revenue recognition)” to consolidated financial statements.
(Significant subsequent events)
Not applicable.
iv) Non-consolidated supplemental schedules
Detailed schedule of fixed assets

Category

Types of assets

3,737

22

3

121

3,756

1,911

Structures

462

10

2

9

470

410

7,287

113

41

221

7,360

6,807

37

－

2

0

35

35

Tools, Furniture andfixtures

2,205

94

19

136

2,281

2,075

Land

1,328

－

－

－

1,328

－

Leased assets

24

10

－

2

34

25

Construction inprogress

7

327

290

－

44

－

Total

15,088

577

357

489

15,30911,263

Goodwill

1,467

－

－

127

1,467

1,375

Software

668

46

－

31

714

649

Other

26

24

46

0

4

0

2,161

70

46

158

2,185

2,025

VehiclesIntangible
assets

Total(Notes)Balance at Increase in Decrease in
Amortization Balance at Accumulated
beginning of the fiscal year the fiscal yearof goodwill end of period depreciation
periodunder review under review

Buildings

Machinery andequipment

Property, plantand equipment(Millions of yen)

1.
2.

Balance at beginning of period and balance at end of period are indicated by the acquisition prices.
Major components of the increase in the fiscal year under review are as follows.
(Millions of yen)
Types of assets
Site
Value
Machinery and equipment
Chiba Plant
65
Machinery and equipment
Akoh Plant
44
Tools, furniture and fixtures Kobe Head Office60

3.

Major components of the decrease in the fiscal year under review are as follows.
(Millions of yen)
Types of assets
Site
Value
Machinery and equipment
Chiba Plant
26

Detailed schedule of allowances(Millions of yen)

Balance at beginningof period

Increase in the fiscal
year under review

Decrease in the fiscal
year under review

Balance at end of
periodAllowance for doubtful
accounts

8

9

8

9

Provision for bonuses

448

387

448

387

Account item―96―

(2) Details of major assets and liabilities
This information is omitted because the Company prepares consolidated financial statements.
(3) Other
Not applicable.

―97―VI. Outline of Share-related Administration of Reporting Company
Fiscal year

From March 1 to the end of February

Ordinary general meeting ofshareholders

May

Record date

Last day of February

Record dates for dividend of
surplusNumber of sharesconstituting one unit ofstock
Repurchase of less-thanone-unit shares

Last day of February
August 31
100

Place for repurchaseprocessing

Special account
Osaka Corporate Agency Division, Mitsubishi UFJ Trust and Banking Corporation
3-6-3 Fushimi-cho, Chuo-ku, Osaka

Administrator ofshareholders’ register

Special account
Mitsubishi UFJ Trust and Banking Corporation
1-4-5 Marunouchi, Chiyoda-ku, Tokyo

Contact place
Repurchase charge

Method of public noticeSpecial benefits forshareholders

─────
Free
Public notice by the Company shall be given by electronic means; provided, however, that in
the event an accident or any other unavoidable reason prevents public notice by electronicmeans, the notice can be given in the Nihon Keizai Shimbun.
URL for public notice:https://www.moresco.co.jp/(From the record date in February 2023)
Number of shares held and continued holding period
Details of benefit
300 shares or more, and continued holding period
Quo card 3,000 yenof less than 3 years
300 shares or more, and continued holding period
Quo card 4,000 yenof 3 years or more
Eligible shareholders are those listed or recorded on the shareholders’ register as of the last
day of February each year and holding 300 shares or more of the Company’s stock.
*
Continued holding period of 3 years or more means that the same shareholder number islisted or recorded on the shareholders’ register as of the end of February and the end of
August for at least seven consecutive times.
*
If a shareholder holding less than 300 shares later purchases additional shares to hold 300
shares or more as of the end of February, the period of holding less than 300 shares is
included in the consecutive holding period.

―98―VII Reference Information of Reporting Company
1.

Information on parent company, etc. of the reporting company
The Company has no parent company, etc. as prescribed in Article 24-7, Paragraph 1 of the Financial Instruments and Exchange
Act.

2.

Other reference information
The Company filed the following documents between the beginning of the fiscal year under review and the date when this Annual
Securities Report (Yukashoken-Hokokusho) was filed.
(1) Annual securities report and attached documents, and confirmation note
Fiscal year (the 64th) (from March 1, 2021 to February 28, 2022)
Submitted to the director of the Kinki Local Finance Bureau on May 27, 2022
(2) Internal Control Report and its attached documents
Submitted to the director of the Kinki Local Finance Bureau on May 27, 2022
(3) Quarterly reports and confirmation notes(The 1st quarter of 65th term) (from March 1, 2022 to May 31, 2022)
Submitted to the director of the Kinki Local Finance Bureau on July 13, 2022
(The 2nd quarter of 65th term) (from June 1, 2022 to August 31, 2022)
Submitted to the director of the Kinki Local Finance Bureau on October 13, 2022
(The 3rd quarter of 65th term) (from September 1, 2022 to November 30, 2022)
Submitted to the director of the Kinki Local Finance Bureau on January 13, 2023
(4) Extraordinary Report
Submitted to the director of the Kinki Local Finance Bureau on June 1, 2022
An extraordinary report according to the provision of Article 19, Paragraph 2, Item 9-2 (Matters that require a resolutionof a general meeting of shareholders) of the Cabinet Office Ordinance on Disclosure of Corporate Information, etc.
(5) Share Buyback Report
A share buyback report on purchase of treasury shares according to Article 24-6, Paragraph 1 of the Financial Instruments
and Exchange Act of Japan(Reporting period: from July 1, 2022 to July 31, 2022)
Submitted to the director of the Kinki Local Finance Bureau on August 8, 2022

―99―

Part II Information on the Reporting Company’s Guarantor, etc.
Not applicable.

―100―Independent Auditors’ Audit Report and Internal Control Audit Report
May 30, 2023
MORESCO Corporation
The Board of Directors
Grant Thornton Taiyo LLC
Osaka Office
Designated Limited
PartnerEngagement Partner

Certified Public Accountant Iwao Arai

Seal

Designated Limited
PartnerEngagement Partner

Certified Public Accountant Kenji Furuta

Seal<Financial statements audit>
OpinionIn order to provide the audit certification in accordance with the provision of Article 193-2, Paragraph 1 of the Financial Instruments
and Exchange Act, we have audited the accompanying consolidated financial statements presented under “Financial Information” of
MORESCO Corporation for the period from March 1, 2022 to February 28, 2023, which comprise the consolidated balance sheet,consolidated statement of income, consolidated statement of comprehensive income, consolidated statement of changes in equity,
consolidated statement of cash flows, important matters that are the basis for preparation of consolidated financial statements, otherNotes, and consolidated supplemental schedules.
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of MORESCO
Corporation and its consolidated subsidiaries as of February 28, 2023, and their financial performance and cash flows for the
consolidated fiscal year then ended in accordance with accounting principles generally accepted in Japan.
Basis of Opinion
We conducted our audit in accordance with the auditing standards generally accepted in Japan. Our responsibilities under thosestandards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of ourreport. We are independent of the Company and its consolidated subsidiaries in accordance with the ethical requirements that are
relevant to our audit of the consolidated financial statements in Japan, and we have fulfilled our other ethical responsibilities inaccordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide abasis for our audit opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated
financial statements of the current period. These matters were addressed in the context of the audit of the consolidated financial
statements as a whole, and in forming the auditor’s opinion thereon, and we do not provide a separate opinion on these matters.

―101―

Valuation of inventories of MORESCO Corporation
Description of Key Audit Matters and the Reasons for the
Description

Auditor’s Response

In the consolidated balance sheet for the consolidated fiscal year In order to examine the adequacy of the valuation of inventories,
ended February 28, 2023 of MORESCO Corporation,
we performed the following audit procedures.
“Merchandise and finished goods” of 3,276 million yen and・ Evaluated the effectiveness of the design and operation of“Raw materials and supplies” of 3,030 million yen are reported.
internal control related to the valuation of inventories. In
As described in Notes (Important accounting estimates), theparticular, we focused on internal control to conduct
Company calculates the balance sheet values of inventories by
individual examination of future sales prospect of slowwriting down the book values in response to decreased
moving stock.
profitability, and those that have passed a certain period of time ・ Discussed with management, etc. on whether the standards
or have exceeded a certain turnover period as of the end of thefor evaluating inventories adopted by the Company are
fiscal year are judged as slow-moving stock, excluding those
appropriate for the Company’s businesses and comply withjudged to have the potential to be sold as a result of individual
the Accounting Standard for Measurement of Inventories,”
examination in light of the future sales prospect based on pastand examined their rationality.
sales performance, etc., and the fact of decreased profitability is ・ Questioned management, etc. about the basis of a certain
reflected by using a regular write-down method of book values.
period and a certain turnover period set by management andDetermination of a certain period of time or a certain
whether or not to review the valuation policy. Also analyzed
turnover period, which is the basis of judgment of slow-moving
the trends in subsequent sales results of the slow-moving
stock, includes judgment by management. Also, individual
stock in the past and verified the rationality of the valuation
examination in light of the future sales prospect is conducted
policy.
using order estimates based on past sales performance, etc.,
・ Checked the accuracy of the data of receipt/payment dates,
which is associated with a high degree of uncertainty because thewhich is the basis of calculation of a certain period, byorder estimates may fluctuate due to factors beyond
verifying the consistency with the dates on the daily
management’s control.
manufacturing report. Also, checked the accuracy of the
As such, we determined valuation of inventories held by thequantity of inventories consumed during the current period,
Company as a Key Audit Matter.
which is the basis of calculation of a certain turnover period,by verifying the consistency with the output data of theinventory management system.
・ Checked the accuracy of sales results data of the preceding
fiscal year, which is the basis of calculation of future sales
prospect, by verifying the consistency with the output data of
the sales management system.
・ To confirm the rationality of the results of the individual
examination of sales prospect, questioned management, etc.
whether the future sales prospect calculated based on the
results, etc. of the preceding fiscal year involves any othermatters to be considered in estimation.
・ Confirmed that internal approval procedure was followed forthe individual examination of sales prospect.

Other Statements
Other statements comprise the information included in the Annual Securities Report other than the consolidated financial statements
and non-consolidated financial statements, as well as our auditor’s report thereon. Management is responsible for the preparation anddisclosure of other statements. The Audit and Supervisory Committee is responsible for monitoring the execution of the duties of
directors related to designing and operating the process of reporting other statements.
Other statements are not included in the scope of our audit opinion regarding the consolidated financial statements, and we do not
express our opinion on the other statements.
Our responsibility with regard to the audit of the consolidated financial statements is to read through other statements andconsider whether there are any material differences between the other statements and the consolidated financial statements or theknowledge we have obtained through our audit. Furthermore, it is our responsibility to pay attention to whether or not there are signsof material errors in other statements, in addition to such material differences.
When we determine that there are material errors in other statements through our audit work, we are required to report such fact.
We have found no matters to report regarding other statements.
Management’s and the Audit and Supervisory Committee’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance withaccounting principles for consolidated financial statements generally accepted in Japan, and for designing and operating such internal
control as management determines is necessary to enable the preparation and fair presentation of the consolidated financial statementsthat are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as agoing concern, disclosing, as applicable, matters related to going concern in accordance with accounting principles generally acceptedin Japan.
The Audit and Supervisory Committee is responsible for overseeing the directors’ performance of their duties, including thedesign, implementation and maintenance of the Group’s financial reporting process.

―102―

Auditor’s Responsibility for the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material
misstatement, whether due to fraud or error, based on our audit and to issue an auditor’s report that includes our opinion from an
independent standpoint. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the decisions of users taken on the basis of these consolidated financial statements.
As part of our audit in accordance with auditing standards generally accepted in Japan, we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:・ Identify and assess the risks of material misstatement, whether due to fraud or error, design and perform audit procedures
responsive to those risks. The audit procedures are selected and performed depending on the auditor’s judgment. Also, obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion.
・ Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in thecircumstances, while the objective of the audit is not to express an opinion on the effectiveness of the Group’s internal control.
・ Evaluate the appropriateness of accounting policies and the method of their application, and the reasonableness of accounting
estimates and related disclosures made by management.
・ Conclude on the appropriateness of management’s use of the going concern basis of accounting and based on the audit evidence
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability
to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’sreport to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to express ouropinion with exclusions in the consolidated financial statements. Our conclusions are based on the audit evidence obtained up to
the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.
・ Evaluate whether the presentation and disclosures in the consolidated financial statements are in accordance with accounting
standards generally accepted in Japan, the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in amanner that achieves fair presentation.
・ Obtain sufficient appropriate audit evidence regarding the financial information of the Company and its consolidated subsidiaries
to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performanceof the audit of the consolidated financial statements. We remain solely responsible for our audit opinion.
We communicate with the Audit and Supervisory Committee regarding the planned scope and timing of the audit, significant
audit findings, including any significant deficiencies in internal control that we identify during our audit, and other matters required by
the audit standards.
We also provide the Audit and Supervisory Committee with a statement that we have complied with relevant ethical requirements
regarding independence in Japan and report all relationships and other matters that may reasonably be thought to affect our
independence, and where applicable, related safeguards.
Of matters discussed with the Audit and Supervisory Committee, we determine the ones we judge to be of particular importanceto our audit of the consolidated financial statements for the fiscal year under review and identify them as Key Audit Matters. We
describe these matters in our auditor’s report unless laws or regulations prohibit public disclosure regarding the matters, or when, in
extremely rare circumstances, we determine that a matter should not be reported because disadvantages of doing so would reasonably
be expected to outweigh the public interests of such communication.

―103―

<Internal control audit>
OpinionWe have audited, pursuant to the provisions of Article 193-2, paragraph 2 of the Financial Instruments and Exchange Act of Japan, theinternal control report as of February 28, 2023 of MORESCO Corporation.
In our opinion, the above internal control report, in which MORESCO Corporation indicated that internal control over financial
reporting as at February 28, 2023 was effective, fairly represents, in all material respects, evaluation results of internal control overfinancial reporting in accordance with evaluation standards for internal control over financial reporting generally accepted in Japan.
Basis of Opinion
We conducted our audit in accordance with auditing standards for internal control over financial reporting generally accepted in Japan.
Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Internal Control
Report section of our report. We are independent of the Company and its consolidated subsidiaries in accordance with the ethicalrequirements that are relevant to our audit of the consolidated financial statements in Japan, and we have fulfilled our other ethicalresponsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion.
Management’s and the Audit and Supervisory Committee’s Responsibility for the Internal Control ReportManagement is responsible for the design and operation of internal control over financial reporting and the preparation and fairpresentation of the internal control report in accordance with assessment standards for internal control over financial reporting
generally accepted in Japan.
The Audit and Supervisory Committee is responsible for overseeing and examining the design and operation of internal control
over financial reporting.
Internal control over financial reporting may not completely prevent or detect misstatements in financial reports.

―104―

Auditor’s Responsibility for the Internal Control Report
Our objectives are to obtain reasonable assurance about whether the internal control report is free from material misstatement based on
our audit of the internal control report and to issue an auditor’s report that includes our opinion from an independent standpoint.
As part of our audit in accordance with auditing standards for internal control over financial reporting generally accepted inJapan, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:・ Perform procedures to obtain audit evidence about the results of the assessments of internal control over financial reporting in theinternal control report. The procedures for the internal control audit are selected and performed, depending on the auditor’s
judgment, based on the significance of effect on the reliability of financial reporting.
・ Evaluate the overall presentation of the internal control report, including the appropriateness of the scope, procedures and results of
the assessments of internal control over financial reporting that management presents.
・ Obtain sufficient appropriate audit evidence about the results of the assessments of internal control over financial reporting in theinternal control report. We are responsible for the direction, supervision and performance of the audit of the internal control report.
We remain solely responsible for our audit opinion.
We communicate with the Audit and Supervisory Committee regarding the planned scope and timing of our internal control audit,
the results thereof, material weaknesses in internal control identified that should be disclosed and those that were remediated, and othermatters required by the standards for internal control audit.
We also provide the Audit and Supervisory Committee with a statement that we have complied with relevant ethical requirements
regarding independence in Japan and report all relationships and other matters that may reasonably be thought to affect our
independence, and where applicable, related safeguards.
Conflicts of Interest
Our firm or its engagement partners have no interest in the Company and its consolidated subsidiaries which should be disclosed incompliance with the Certified Public Accountants Act.
(Notes)1.

2.

The document presented above is a digitized copy of the original version of the Independent Auditors’ Audit Reportand Internal Control Audit Report. The original report is kept separately by the Company (the reporting company of
the Annual Securities Report).
XBRL data is not included in the scope of the audit.

―105―

Independent Auditor’s Audit Report
May 30, 2023
MORESCO Corporation
The Board of Directors
Grant Thornton Taiyo LLC
Osaka Office
Designated Limited
PartnerEngagement Partner

Certified Public Accountant

Iwao Arai

Designated Limited
PartnerEngagement Partner

Certified Public Accountant

Kenji Furuta Seal

Seal

OpinionIn order to provide the audit certification in accordance with the provision of Article 193-2, Paragraph 1 of the Financial Instruments
and Exchange Act, we have audited the accompanying non-consolidated financial statements presented under “Financial Information”
of MORESCO Corporation for the period from March 1, 2022 to February 28, 2023, which comprise the non-consolidated balance
sheet, non-consolidated statement of income, non-consolidated statement of changes in equity, significant accounting policies andother Notes, and the non-consolidated supplemental schedules.
In our opinion, the non-consolidated financial statements present fairly, in all material respects, the financial position of
MORESCO Corporation as at February 28, 2023, and its financial performance and cash flows for the fiscal year then ended inaccordance with accounting principles generally accepted in Japan.
Basis of Opinion
We conducted our audit in accordance with the auditing standards generally accepted in Japan. Our responsibilities under thosestandards are further described in the Auditor’s Responsibilities for the Audit of the Non-Consolidated Financial Statements section of
our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit in Japan, andwe have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our audit opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the non-consolidated
financial statements of the current period. These matters were addressed in the context of the audit of the non-consolidated financial
statements as a whole, and in forming the auditor’s opinion thereon, and we do not provide a separate opinion on these matters.

―106―Valuation of inventories
Statement is omitted because it is the same information as the Key Audit Matters presented in the audit report of theconsolidated financial statements.

Other Statements
Other statements comprise the information included in the Annual Securities Report other than the consolidated financial statements
and non-consolidated financial statements, as well as our auditor’s report thereon. Management is responsible for the preparation anddisclosure of other statements. The Audit and Supervisory Committee is responsible for monitoring the execution of the duties of
directors related to designing and operating the process of reporting other statements.
Other statements are not included in the scope of our audit opinion regarding the non-consolidated financial statements, and we
do not express our opinion on the other statements.
Our responsibility with regard to the audit of the non-consolidated financial statements is to read through other statements andconsider whether there are any material differences between the other statements and the non-consolidated financial statements or theknowledge we have obtained through our audit. Furthermore, it is our responsibility to pay attention to whether or not there are signsof material errors in other statements, in addition to such material differences.
When we determine that there are material errors in other statements through our audit work, we are required to report such fact.
We have found no matters to report regarding other statements.
Management’s and the Audit and Supervisory Committee’s Responsibility for the Non-Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the non-consolidated financial statements in accordance withaccounting principles for non-consolidated financial statements generally accepted in Japan, and for designing and operating suchinternal control as management determines is necessary to enable the preparation and fair presentation of the non-consolidated
financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the non-consolidated financial statements, management is responsible for assessing the Company’s ability tocontinue as a going concern, disclosing, as applicable, matters related to going concern in accordance with accounting principles
generally accepted in Japan.
The Audit and Supervisory Committee is responsible for overseeing the directors’ performance of their duties, including thedesign, implementation and maintenance of the Group’s financial reporting process.

―107―

Auditor’s Responsibility for the Non-Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the non-consolidated financial statements as a whole are free frommaterial misstatement, whether due to fraud or error, based on our audit and to issue an auditor’s report that includes our opinion froman independent standpoint. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the decisions of users taken on the basis of these non-consolidated financial statements.
As part of our audit in accordance with auditing standards generally accepted in Japan, we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:・ Identify and assess the risks of material misstatement, whether due to fraud or error, design and perform audit procedures
responsive to those risks. The audit procedures are selected and performed depending on the auditor’s judgment. Also, obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion.
・ Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in thecircumstances, while the objective of the audit is not to express an opinion on the effectiveness of the Company’s internal control.
・ Evaluate the appropriateness of accounting policies and the method of their application, and the reasonableness of accounting
estimates and related disclosures made by management.
・ Conclude on the appropriateness of management’s use of the going concern basis of accounting and based on the audit evidence
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s
ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our
auditor’s report to the related disclosures in the non-consolidated financial statements or, if such disclosures are inadequate, toexpress our opinion with exclusions in the non-consolidated financial statements. Our conclusions are based on the audit evidence
obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as agoing concern.
・ Evaluate whether the presentation and disclosures in the non-consolidated financial statements are in accordance with accounting
standards generally accepted in Japan, the overall presentation, structure and content of the non-consolidated financial statements,
including the disclosures, and whether the non-consolidated financial statements represent the underlying transactions and eventsin a manner that achieves fair presentation.
We communicate with the Audit and Supervisory Committee regarding the planned scope and timing of the audit, significant
audit findings, including any significant deficiencies in internal control that we identify during our audit, and other matters required by
the audit standards.
We also provide the Audit and Supervisory Committee with a statement that we have complied with relevant ethical requirements
regarding independence in Japan and report all relationships and other matters that may reasonably be thought to affect our
independence, and where applicable, related safeguards.
Of matters discussed with the Audit and Supervisory Committee, we determine the ones we judge to be of particular importanceto our audit of the non-consolidated financial statements for the fiscal year under review and identify them as Key Audit Matters. We
describe these matters in our auditor’s report unless laws or regulations prohibit public disclosure regarding the matters, or when, in
extremely rare circumstances, we determine that a matter should not be reported because disadvantages of doing so would reasonably
be expected to outweigh the public interests of such communication.
Conflicts of Interest
Our firm or its engagement partners have no interest in the Company which should be disclosed in compliance with the Certified
Public Accountants Act.
(Notes)1.

2.

The document presented above is a digitized copy of the original version of the Independent Auditors’ Audit Reportand Internal Control Audit Report. The original report is kept separately by the Company (the reporting company of
the Annual Securities Report).
XBRL data is not included in the scope of the audit.

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